The Final Quarter of 2020 is Almost Here. These are Things to Check in Your Finances Now:
It has been a tumultuous year, and it still isn’t over, with various impacts on the financial health of Americans.
The coronavirus pandemic, the upcoming election and other factors all could play a role. As we enter the final quarter of 2020, here are some of the personal finance, tax and other issues, trends and reminders that are coming into focus.
Filing deadline nears for 2019 returns
Millions of Americans still haven’t filed their income-tax returns for 2019, and the Oct. 15 deadline given for automatic extensions is approaching.
In early September, the Internal Revenue Service started to send out filing reminders to 8.9 million taxpayers, or about 6% of the 150 million individual filers that the IRS expected last year. That includes 239,000 Arizonans who still need to prepare and submit their tax documents for last year.
Taxpayers who haven’t yet filed for 2019 generally can avoid additional penalties and interest by filing returns as soon as possible and paying any taxes owed.
If you sought an extension but haven’t paid your tax bill yet, you would owe that plus interest from July 15, said Arnold van Dyk, director of tax services at TaxAudit.
If you can’t pay, be prepared to set up a payment plan or consider other options such as an offer in compromise with the IRS, he said. You also should file by Oct. 15 to avoid a late-filing penalty, though this penalty doesn’t apply if a refund is due.
Changes possible for retirement contributions
If you contribute to retirement plans, here’s a new wrinkle to think about: A Joe Biden presidential victory in the November election could usher in various tax changes, depending on how well Democrats also fare in the House and Senate.
Under the Biden proposal, all individuals would receive a refundable tax credit estimated at 26% of the dollar amounts contributed, according to Matt Sommer at Janus Henderson Investors. The impact would tend to favor lower-income workers, including many who don’t currently contribute to retirement accounts, possibly encouraging their participation, while diminishing the tax benefits for higher-income individuals.
All this eventually might argue for putting more money into Roth IRAs or 401(k) plans, if available, as their appeal doesn’t depend on the value of front-end deductions or credits.
The fourth quarter is the time when employees typically have the opportunity to choose retirement, health and other benefits through their companies’ annual open-enrollment process. This year, the COVID-19 pandemic is exerting an impact.
Aflac, which provides supplemental injury and sickness insurance, recently polled 2,000 employees in its 2020 Aflac WorkForces Report.
Of employee respondents, 49% said the pandemic was a wake-up call to spend more time researching and selecting health-coverage options. This could be a major shift, Aflac said, given that 92% of respondents last year said they stayed with the same benefits and spent, on average, just 33 minutes considering their options.
“For the past 10 years, our survey found that employees (were) on autopilot when it comes to the choices they make,” said Matthew Owenby, Aflac’s chief human resources officer in a statement.
COVID-19, however, seems to have changed that. Many employees, for example, aren’t sure what their health benefits will cover if they or family members are affected by the virus. Two-thirds said they already have been financially hurt, at least a bit, by the pandemic.
Open enrollment also is a good time to consider rebalancing 401(k) investments that have taken a wild ride on this year’s stock market roller coaster and reviewing 401(k) loan provisions. Inquire, too, about other possible employer benefits such as debt-repayment help, financial counseling and the like.
Checking up on other insurance
The pandemic also has altered the landscape for other types of insurance.
Home prices, for example, have risen this year, so it might be a good idea to review whether your current insurance provides adequate coverage. Perhaps more timely, an auto-policy review might be in order.
With more people laid off or working at home, and with fewer cars on the road, accidents have dropped and insurance companies are paying out less money in claims. This could translate into a notable drop in the premiums you pay for vehicle coverage.