April 2021 Tax Deadlines
2021 is upon us. It has started out as hectic and unsettling as 2020. However, I am praying it will be a far better year once we get settled in.
From a tax deadline perspective, it is back to business as usual. (for the moment)
What do I mean by this?
Each year, our tax returns are due on April 15, but that date also serves as the deadline for other activities as well. Some examples:
You have until April 15, 2021 to make IRA contributions for 2020
Of course you can make contributions for 2021 at that time as well, but if you missed making your contribution for 2020…. April 15, 2021 is the last date for that contribution. (and remember, everyone can make an IRA contribution if you had eligible income in 2020.) True, there are additional rules that apply to Roth IRA contributions, and whether your IRA contribution can be made with pre-tax funds. But please remember you can always make an IRA contribution if you have eligible income. Your non-working spouse might be able to contribute as well. Check with your Financial Advisor or accountant to see if you qualify.
The same holds for i401K and SEP IRA plans
These are tax-deferred savings plans that are mainly used by self-employed individuals and smaller businesses. April 15, 2021 is the deadline for year 2020 contributions here too. (Actually, if you file an extension for your tax return, the extension date becomes the contribution cut-off for these plans. For most filers, the deadline will be April 15th.)
HSA (Health Savings Accounts) also have an April 15 deadline
if you had a high-deductible health insurance plan in 2020 and want to maximize the amount you can contribute to your HSA, you need to have it done by April 15.
Initial RMDs if you are retired and reached 70 ½ in 2019
The actual date to take note of here is April 1, 2020 not the 15th. These rules changed with the Secure Act in 2019, and depending on birthyear, you can now wait until 72 before making your first RMD (Required Minimum Distribution). However, the Act was passed in late 2019 and was not retro-active. If you turned 70 ½ in 2019 you must make your first RMD by April 1st, 2020.
Estimated tax installments for Q1 2021 and 2020 Tax Returns
Yes, I saved the best for last! If you owe taxes for 2020, you need to either pay them by April 15th or file an extension. Even if you do file an extension to Oct. 15, you still need to estimate your taxes due and make an estimated payment. In addition, if you are required to make estimated tax payments for 2021, your first payment is also due on April 15th.
Phew! That is a lot of potential outflow at or around April 15. Taxes, IRA contributions, HSA contributions - all with the same deadline. You might want to consult your financial planner now to be ready for any outflows in the coming months.
As usual, if you have any comments or questions, please do not hesitate to reach out.
Cheers, and best wishes for the 2021 tax season!
This is being provided for informational purposes only and should not be construed as a recommendation to buy or sell any specific securities. The views expressed are those of Southern Investment Management Collective (SIMC) and do not necessarily reflect the views of Mutual Advisors, LLC or any of its affiliates. SIMC, nor any of its members, are tax accountants or legal attorneys, and do not provide tax or legal advice. For tax or legal advice, you should consult your tax or legal professional. Investment advisory services offered through Mutual Advisors, LLC DBA Southern Investment Management Collective, a SEC registered investment adviser.
About the Author: Kent Fisher, CFA, CFP®
Kent Fisher is a Chapel Hill, NC Fee-Only Comprehensive Wealth Manager at the Southern Investment Management Collective (SIMC). SIMC provides comprehensive financial planning, retirement planning and investment management services to help clients organize, grow, and protect their assets. SIMC serves clients as a fiduciary, and tailors all solutions to each client's unique situation.