There is a new tax deadline, now what?
Most of you are aware that the new tax deadline for 2020 has changed to July 15th. Normally, if you don’t file your tax return and pay in full, you can expect penalties and interest. However, the effects of COVID-19 have caused those penalties and interest accruals be deferred until after the new deadline of July 15th, 2020. While it should come as no surprise, there are plenty of reasons that responsible taxpayers aren’t prepared for tax time. Tax forms get lost or sent to the wrong address, disasters take focus away from filing, and major taxable events occur that can be difficult report. Luckily, the IRS allows for an automatic extension to file! By filing Form 4868 you will have until October 15th to avoid the late filing penalty, but your taxes are still due July 15th this year and on April 15th of each normal year. Just because you don’t file by the initial deadline, you should estimate how much you will owe and send it with your extension.
Where and how do I file an extension before the tax deadline?
Ideally, your tax advisor will be able to file an extension for you before the tax deadline. In order to file on your own, the IRS provides free extensions through their FreeFile software on www.IRS.gov. There are other online services that will file an extension for you such as Turbo Tax, File Later, and other tax preparation software. You can file your own form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, which is made available to the public on www.IRS.gov. To file an extension, you will need to fill out your identifying information (name, address, SSN), total tax payments you’ve made so far, and an estimate of your total tax liability.
What do I do if I think I will owe the IRS?
It’s not always an easy task to guess what you will owe, but doing so could save you a big chunk of penalties and interest. If you owe the IRS every year, it might be a good idea to assume last year’s taxes will be like the current year. Tax laws change regularly, but if your income was the same than you can expect a similar tax bill. If you expect to owe but can’t figure out how much, send the IRS the highest amount you anticipate owing. By doing this, you can be confident that you will be filing for a refund and potentially save tons of penalties and interest.
Can’t make those IRS payments?
If your primary worry is not being able to pay back the IRS by the tax deadline, don’t let this keep you from filing. When you have your tax documents together and are ready to file, don’t delay. If you didn’t pay by April 15th then any outstanding balance will continue to accrue penalties and interest. Once you file your return, you will find out how much you have underpaid the IRS. If you owe less than $50,000 to the IRS, you can find the Online Payment Agreement Application on the IRS website. The IRS will then review your application and set up monthly payments if approved. These payments will be set for the same day each month and will continue until the debt is paid in full.
There is still time…..
There have been other aspects that have changed due to the automatic extended deadline. First and second quarterly estimated payments and the IRA contribution deadline have been extended to July 15th, 2020. This means that if you haven’t paid your quarterly estimated payments by the usual quarterly deadlines of April 15th and June 15th, then you have until July 15th before penalties and interest are applied for underpaying. This also means that if you haven’t contributed to an IRA yet for 2019, then you still have until July 15th to make that 2019 contribution without being penalized.
At Molen & Associates our tax advisors are here to help you. If you have questions we are readily available to answer and guide you with your tax and financial needs.