Update: Tax & IRA Deadline

Over the past several years, you have seen several posts from Albion’s Senior Wealth Advising team designed to help you and your family make a lifetime of good financial decisions. 

The first step in making any good decision is to understand the relevant facts.  However, given recent events, there have been a plethora of changes that have come out over a very short period.  Understandably, it is difficult for anyone to keep up with all these changes.  

Our goal in this post, and those coming soon, is to help keep you informed on some of the important changes that likely impact many of our Albion client families.  Because the traditional tax filing deadline of April 15 is rapidly approaching, today’s post focuses on changes to Federal and Utah tax filing deadlines as wells as IRA funding deadlines.  (Spoiler alert … you have more time)

In the coming days, we will share more information on other areas and possibly revisit previous topics with additional insights.

As always, if you have any questions, please feel free to call us.  These are challenging times, but they are also a time of opportunity.  Your Team at Albion is here to help you successfully navigate this period and continue to make a lifetime of good decisions.

Tax Deadlines Extended:

Federal Taxes:

The tax filing deadline has been moved from April 15 to July 15 without owing penalties and interest.  This relief applies to all individual returns, trusts, and corporations. Taxpayers are not required to file any documentation to take advantage of the delay.  

This relief only applies to federal income tax payments otherwise due April 15, 2020, not state tax payments or deposits or payments of any other type of federal tax. 

Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. You will automatically avoid interest and penalties on the taxes paid by July 15.

This federal tax relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020.  No guidance has been given about the estimated tax payments for Quarter 2, 2020 that are due June 15.

Individual taxpayers who need additional time to file beyond the July 15 deadline can request a filing extension by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004.

State Taxes:

By Utah statute, individuals have the same deadline to file and pay their 2019 taxes as the IRS, which is July 15, 2020. Additionally, interest and penalties are waived for late-filed 2019 tax returns and payments of corporations and pass-through entities such as LLCs.  To receive this adjustment, these returns and payments must be filed no later than July 15, 2020. 

Funding of IRAs and Health Savings Accounts Extended:

You have three additional months to make your 2019 IRA contributions or Health Savings Account contributions.   

The IRA contribution limit for both 2019 and 2020 for those under the age of 50 is $6,000; it is $7,000 for those age 50 and over.

The Health Savings Account contribution limits for 2019 are $3,500 for an individual and $7,000 for a family, with a $1,000 catch up for those over age 55.  

We recommend writing the year of the contribution in the memo section of the check for record keeping purposes.

Roth Conversion Opportunity:

While it may feel counter intuitive, doing a Roth conversion after a market pullback can make a lot of sense.  Why?  Because lower account values also means lower taxes owed. For example, an account that was worth $100,000 might now be worth just $90,000.  Converting that account now result in you paying less overall taxes for the conversion.

You may consider a Roth conversion using existing investments inside of your IRA rather than cash.  Your investments can be converted from an IRA to a Roth IRA, thus allowing future growth to occur in a Roth IRA.  You would pay tax on the amount converted to your Roth IRA as ordinary income.  A Roth IRA grows tax free, and qualified distributions are tax free.  

We are here for you and are happy to help you with any questions that you may have.

Warm Regards,

Your Senior Wealth Advising Team

About the author

John Bird

John Bird's fascination with social and economic systems gives invaluable context to Albion’s investing and wealth-management strategies. Specializing in complex financial planning issues, client investment policy formulation, and private account portfolio structure, he helps each client chart a course for long-term prosperity. Empowering clients to make educated decisions in an ever-changing world is his passion.

John has received numerous recognitions in national and local publications including Bloomberg Magazine, Worth Magazine, Medical Economics, The Salt Lake Tribune and Deseret News. John currently serves as a member of the CFA Institute, the Salt Lake Society of Financial Analysts, the Utah Estate Planning Council and as Finance Chair on the Board of Trustees of Rowland Hall School. He has also served as a board member for the Utah Chapter of the Financial Planning Association, and as Chairman of the Western Region of the National Association of Personal Financial Advisors.

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