If you thought it’s been a whirlwind of changes from the Treasury Department and IRS regarding tax filing deadlines you’re not alone. Now, don’t get me wrong, we’re all grateful for any reprieve we can get during these difficult times. But’s it’s been hard to keep up with all of the date changes, extensions, when to pay, what to pay, and which tax filings are affected. Here’s a basic summary:
- Form 1040 Filing Deadline for 2019 extended automatically 90 days until July 15th without penalties or interest.
- No Federal tax payments under Form 1040 for 2019 due until July 15th with no penalties or interest.
- 1st Quarter Estimated Tax Payments for 2020 are automatically postponed for 90 days and not due until July 15th with no penalties or interest.
- Health Savings Account (HSA) Contributions (HSA) for 2019, still due July 15th.
- Individual Retirement Account (IRA) Contributions for 2019, still due July 15th.
- Coverdell (Educational) IRAs for children for 2019, still due July 15th.
- Back Door Roth IRA Set-up & Conversion for 2019 must be completed by July 15th.
- Self Directed IRA Accounts with UBIT or UDFI in 2019 must still report Form 990-T by July 15th. (an Extension until October 15th can be filed)
- Deadline to Fund SEP IRA or Solo 401k Contributions for 2019 extended by 90 days and not due until July 15th, unless a further extension is applied for. (S-Corp owners would have until Sept 15th, if a prior extension was filed before March 16th. Sole-Proprietors would have until October 15th if they apply for another extension on July 15th.
The single largest filing change was that individual taxpayers will get a three-month (90 day) extension to pay income taxes they owe for 2019, including an extension to file. Of course, filing and payment were typically both due by April 15th, but taxpayers will now have until July 15th, 2020.
Also, the IRS will waive any interest or penalties due on up to $1 million in taxes owed by individuals, and up to $10 million for corporate filers. As expected, this will also be a huge reprieve for pass-thru entities such as S-Corporations and Limited Liability Companies (LLCs). Business owners that owe taxes on their pass-thru income also have an extra 90 days to pay the taxes up to $1M without interest or penalties.
As July 15th draws near, tax professionals are assuming there will still be another three (3) month extension that can be filed for giving individual taxpayers until October 15th to file their 1040 (as usual). The ‘late filing penalty’ will still apply if a taxpayer doesn’t file their return or additional extension by July 15th.
Don’t Delay Filing – You might be Due a Refund
Treasury Secretary Steven Mnuchin also urged taxpayers at a news conference in March that those “who can file their taxes to continue to file their taxes on April 15 because for many Americans, you will get tax refunds and we don’t want you to lose out on those tax refunds,”
Ironically, taxpayers not claiming refunds is a common problem. In 2019, taxpayers left over $1.4 billion in the hands of the IRS for 2015 because they never filed a tax return. After 3 years of not filing, the government gets to keep those unclaimed refunds.
The point is, you could still be due a refund! Thus, don’t take this ‘extension to pay’ as a chance to wait and not file. In fact, according to the IRS, the agency has processed more than 65 million income tax returns this year as of March 6, and of these, 52.7 million filers received tax refunds averaging $3,012.
Check on Your Particular State for it’s Extension Rules
While the federal government is granting taxpayers more time to pay, it doesn’t mean all the states are filing suit.
The American Institute of CPAs is keeping a list of states’ tax developments here, and we urge taxpayers to not assume state agencies are going to allow the same 90 day extension as the Federal Government. Furthermore, remember that taxpayers are ultimately responsible for filing and paying their taxes – not their accountant.
This post will be updated as more details about the tax relief guidelines are released.
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Mark J. Kohler is a CPA, Attorney, co-host of the Radio Show “Refresh Your Wealth” and author of the new book “The and Legal Playbook- Game Changing Solutions For Your Small Business Questions: 2nd Edition”, and “The Business Owner’s Guide to Financial Freedom- What Wall Street isn’t Telling You”. He is also a partner at the law firm Kyler Kohler Ostermiller & Sorensen, LLP and the accounting firmK&E CPAs, LLP.