In an extremely turbulent time for investors and everyday American’s alike, both the Internal Revenue Service and The Federal Reserve and are looking at some interesting monetary strategies in order to lighten the burden on the country. This is a scenario that many of the major players in monetary policy have of course hoped to avoid, but nonetheless have collected quite a few tools at their disposal. Let’s take a look at a few of them and find the silver lining!
On Friday, Treasury Secretary Steven Mnuchin announced in a tweet that the IRS would be extending the filing deadline until July 15th, the same day as the payment deadline. The intention was to give taxpayers and businesses a little more time to get their financial houses in order and be able to make payments without interest or penalties. Initially, the IRS issued guidance to the administration to delay the payment deadline, but to keep the filing deadline where it always is, on April 15th. Lawmakers and tax experts agreed that having them both due on the same day this year would save quite a bit of confusion– the administration eventually heeded their advice and decided to move only the filing deadline back.
Benefits of the new resolution
Of course, if you have already filed and paid your taxes for 2019 this development does not affect you. But this could bring a fair amount of short-term relief to many ordinary Americans who have already filed and owe. According to the IRS, “there is no limitation on the amount of payment that may be postponed.” The most valuable part of this decision is that filers will be able to avoid paying any penalties or interest in the meantime.
However, IRS data shows that the vast majority of taxpayers (73.2%), received refunds last year. For those people, it clearly makes sense to file immediately in order to receive their refunds as soon as possible. Be sure to elect to file electronically and have your refunds delivered via direct deposit in order to receive your funds more quickly (typically within 3 weeks). Another intended benefit is that Americans will now be able to delay meeting with their tax-preparers and maintain the recommended social distancing for the time being.
Tax relief for people with high deductible health plans
The tax deadline extension is not the only advantage announced this week. The IRS also declared its support for high deductible health plans (HDHPs) offering both testing and treatment for Coronavirus without imposing their normal deductibles. This can be an enormous relief to those who are personally dealing with the virus and the financial strife that testing and treatments might entail.
Benefits for those with Health Savings Accounts
The final benefit that hasn’t been as ubiquitous in the news is that the treasury is also waiving the IRS’ normal 6% penalty on disallowed contributions to an HSA and on the earnings of excess contributions. So people can rest easy knowing that those whose tests and treatments are covered by their plans without deductibles will not be penalized by being prohibited from contributing to their health savings account (HSA).
