Saturday, November 27, 2021

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Ask the CFP

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“The will to persevere is often the difference between failure and success.” ~ David Sarnoff, (1891-1971), Radio Corporation of America leader. 

Question: Is it true that 2020 federal taxes aren’t due until May 17, 2021? 

Answer: The Treasury Department and IRS officially extended the deadline for filing 2020 federal tax returns to May 17, 2021. For those with a large tax liability, the new deadline may provide some extra time to develop a thoughtful strategy for paying taxes due. Here’s answers to several frequently asked questions.


Do I still need to file my federal tax return by April 15, 2021? No, the new deadline for filing federal taxes is May 17. If you’re expecting a refund, you may want to file sooner. 

Does the extension apply to state tax return deadlines? No, the extension applies to federal income returns, not state tax payments or deposits. However, some states have also adjusted their deadlines as a result of February storms or other ongoing challenges. Consult your tax professional for more details about your state’s policies, which may change as updates unfold. 

What if I pay estimated quarterly tax payments? The extension does not apply to estimated tax payments due on April 15, 2021. Per the IRS, these payments are still due on April 15.

How do I elect the deferral? No special election needs to be made if you decide to delay. Any interest or penalty from the IRS from April 15 to May 17 will be waived. Penalties and interest will begin to accrue on any remaining unpaid balances after May 17, 2021. 

Does this mean I can make 2020 IRA contributions until May 17? Contributions to an individual retirement account (IRA) for 2020 can be made up to the due date (without regard to extensions) for filing the 2020 federal income tax return. The postponement of the 2020 tax filing due date by the IRS also generally extends the time to make IRA contributions for 2020 to May 17, 2021.

How can I learn more about this change? Visit for related resources and changes resulting from COVID-19 disruptions and contact your tax professional and financial advisor with any questions you have about your specific tax situation and financial plan. 

Proactive planning is a year-round endeavor. Constant awareness of how to potentially help high-earning taxpayers reduce net investment income tax and additional Medicare tax bills is key. Individual taxpayers with modified adjusted gross income (MAGI) of $200,000 face a 3.8% net investment income tax on the lesser of their net investment income amount or the amount by which their MAGI exceeds that $200,000 threshold. For couples filing jointly, the threshold is $250,000. These taxpayers are also subject to a 0.9% additional Medicare tax on wages and self-employment income over the same amount. 

Tax efficiency

Steps that may help to reduce taxes include tax-loss harvesting – selling securities at a loss to offset capital gains taxes – and rebalancing your portfolio to include more tax-advantaged investments, such as municipal bonds. 

Capitalize on employer benefits

If your employer offers a salary deferral plan, maximize your contributions to reduce adjusted gross income and taxes over the long term. Also, if you’re eligible, maximize contributions to an employer Supplemental Employee Retirement Plan (SERP) to reduce your taxable income now and defer the compensation into later years when your tax rate may be lower. Another often-overlooked benefit is an employer health savings plan or flexible spending account. Contributions use pre-tax dollars, reducing your taxable income.

Develop a charitable giving plan

Charitable giving can reduce your tax burden while benefitting your favorite causes. Consider giving appreciated securities to avoid capital gains, which increase your net investment income. Bunching several years’ worth of donations into one year to exceed the standard deduction, making itemizing advantageous, and taking the standard deduction in the years that follow. Establishing a donor-advised fund (DAF) to make future donations and claim the current income tax deduction; or contributing highly appreciated assets to a charitable remainder trust (CRT) to defer recognition of income over time.

Talk to your financial advisor, along with your accountant or tax advisor, to identify and implement the strategies that are most advantageous for your situation. While these tax planning strategies may help you to reduce your overall tax bill, don’t lose sight of your risk tolerance and long-term financial goals. Stay focused and plan accordingly. 

Portfolio rebalancing may have tax consequences. Interest on municipal bonds is generally exempt from federal income tax; it may be subject to the federal alternative minimum tax, or state or local taxes. Profits and losses on federally tax-exempt bonds may be subject to capital gains tax treatment. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Withdrawals from qualified accounts may be subject to income taxes, and prior to age 59-and-a- half, a 10% federal penalty tax may apply. Raymond James financial advisors are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. There is no assurance that any investment strategy will be successful. The opinions expressed are those of the writer as of March 28, 2021 but not necessarily those of Raymond James and Associates, and subject to change at any time. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.” 

This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at (239) 389-1041, email Website:


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