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The Tax-Filing Deadline Is Around the Corner
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Article Highlights: Extensions Balance-Due Payments Contributions to Roth or Traditional IRAs Individual Refund Claims for the 2017 Tax Year Missing Information As a reminder to those who have not yet filed their 2020 tax returns, May 17, is the due date to either file a return (and pay the taxes owed) or file for an automatic extension (and pay an estimate of the taxes owed). Normally April 15 is the due date, but this year the IRS extended it until May 17. Normally the extension period is 6 months, but because the original due date was already pushed back a month, the extension for those who haven’t already filed for one will be for 5 months (to October 15). Caution should be exercised when preparing the extension application, which is IRS Form 4868. Even though this form is described as “automatic,” the extension is automatically granted only if it includes a reasonable estimate of the 2020 tax liability and only if that anticipated liability is paid along with the extension voucher. It is not uncommon for taxpayers to enter zero as the estimated tax liability without figuring the actual estimated amount. These taxpayers risk the IRS classifying their forms as having been improperly completed, which in turn makes the extensions invalid. If you need an extension, please contact this office so that we can prepare a valid extension for you. The extension must be filed in a timely manner; at this office, we can file your extension electronically before the due date. If you are mailing an extension, be advised that the envelope with the extension form must be postmarked on or before the May 17 due date. However, there are inherent risks associated with dropping an extension form in a mailbox; for instance, the envelope might not be postmarked in a timely fashion. Thus, those who have estimated tax due should mail their extension forms using registered or certified mail so as not to risk late-filing penalties. In addition, the May 17 deadline also applies to the following: Balance-Due Payments for the 2020 Tax Year – Be aware that Form 4868 is an extension to file, NOT an extension to pay. The IRS will assess late-payment penalties (with interest) on any balance due, even when the extension has been granted. Taxpayers who anticipate having a balance due need to estimate this amount and include payment for that balance, either along with the extension request (as indicated above) or electronically (through the IRS website). Contributions to a Roth or Traditional IRA for the 2020 Tax Year – May 17, 2021 is the last day for 2020 contributions to either a Roth or a traditional IRA. Form 4868 does not provide an extension for making IRA contributions. Individual Estimated Tax Payments for the First Quarter of 2021 – The first installment of the 2021 estimated tax payment was due on April 15, 2021, and although the IRS extended the due date for filing the 1040 series returns until May 17, 2021, they did not extend the due date for 2021 estimated tax payments. If you make estimated tax payments and did not file the first installment on or before April 15, 2021, then that payment is late, and you should file it as soon as possible to mitigate any penalties. Individual Refund Claims for the 2017 Tax Year – The regular three-year statute of limitations expires for the 2017 tax return on May 17 of this year. Thus, no refund will be granted for a 2017 return (original or amended) that is filed after May 17. Taxpayers could risk missing out on the refundable Earned Income Tax Credit, the refundable American Opportunity Tax Credit for college tuition, and the refundable child credit for the 2017 tax year if they do not file before the statute of limitations ends. Caution: The statute does not apply to balances due for unfiled 2017 returns.
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Tax and Financial Insights
by NR CPAs & Business Advisors
2026 IRS Mileage Rates: Key Updates and Insights
The IRS has rolled out the inflation-adjusted mileage rates for 2026, offering taxpayers an efficient way to claim deductions for vehicle-related expenses incurred for business, charity, medical, or moving purposes. These adjustments reflect the continued economic shifts impacting car operation costs.
Effective January 1, 2026, the new standard mileage rates are established as follows:
- Business Travel: Increased to 72.5 cents per mile, inclusive of a 35-cent-per-mile depreciation allocation. This marks a rise from the 70 cents per mile rate set for 2025
- Medical/Moving Purposes: Reduced slightly to 20.5 cents per mile, down from 21 cents in the previous year, reflecting the variable cost considerations.
- Charitable Contributions: Consistent at 14 cents per mile, a fixed rate unchanged for over a quarter-century.
As is typical, the business mileage rate considers the integral fixed and variable costs of automobile operation. Meanwhile, the medical and moving rates remain contingent on variable expenses as determined by the IRS study.
It is critical to note that the One Big Beautiful Bill Act (OBBBA) held firm on disallowing moving expense deductions except for specific cases within the Armed Forces and intelligence community, marking a substantial shift since 2017.
When engaging in charitable work, taxpayers might opt for a direct expense deduction over the per-mile method, covering gas and oil costs. However, comprehensive upkeep and insurance costs are non-deductible expenses.
Business Vehicle Use Considerations: Taxpayers can alternatively compute vehicle expenses using actual costs, which might benefit from shifting depreciation rules, particularly through bonuses and first-year advantages. Keep in mind, however, reverting from actual cost calculations to standard rates in subsequent years is restricted, particularly per vehicle protocol and when exceeding four vehicles in concurrent use.
Additionally, parking, tolls, and property taxes attributable to business can be deducted independently of the general rate, an often-overlooked advantage by many business owners.
Tax Strategies for Employers and Employees: Reimbursements based on the standard mileage framework, providing the right documentation is in place, remain tax-free for employees. Meanwhile, the elimination and continued prohibition of unreimbursed employee deductions continue, with particular exceptions offered to qualified personnel across specific occupations.
Opportunities for Self-employed Individuals: Entrepreneurs remain eligible for deductions on business-related vehicle use via Schedule C, with potential to account for business-use interest on auto loans.
Heavy SUVs and Deduction Advantages: Heavier vehicles exceeding 6,000 pounds but under 14,000 pounds open opportunities for substantial tax deductions through Section 179 and bonus depreciation avenues. The lifecycle of such a vehicle bears implications on recapturing initially claimed deductions, urging cautious tax planning.
For professional guidance on optimizing your vehicle-related tax deductions and understanding their implications on tax strategies, contact our office in Coral Gables, Florida, where expert advice and strategic insights are just a call away.
Educator's Deduction Reform: Key Changes Under OBBBA
The One Big Beautiful Bill Act (OBBBA) introduces significant enhancements for educators' tax deductions starting in 2026, offering both strategic opportunities and planning considerations for educators who qualify. With the reinstated itemized deduction for qualified unreimbursed expenses, educators have a broader spectrum of financial relief. This is complemented by the retention of the $350 above-the-line deduction, allowing educators to maximize their tax benefits by selectively allocating expenses between these avenues.
Understanding the nuances of these changes is crucial for educators and financial advisors alike. The dual-option deduction strategy can potentially enhance tax efficiency, thereby aligning with broader financial planning goals.
At NR CPAs & Business Advisors, based in Coral Gables, Florida, our expertise in tax preparation and planning provides invaluable support to educators navigating these changes. Our comprehensive approach, combined with personalized advice from our experienced team, ensures compliance and optimization in line with the latest tax legislations.
Given these updates, it is imperative to engage with seasoned professionals to fully leverage your deduction strategies. Contact us today to streamline your tax planning under OBBBA's new guidelines and maximize your deductions for upcoming tax years.
