In response to coronavirus, the Treasury and IRS have announced several changes to the tax filing season, including an extension of the federal tax filing deadline to July 15, 2020. Taxpayers getting a refund are encouraged to file their taxes now to get their money.
We know that you probably have questions about how Coronavirus (COVID-19) relief and the changes to the tax deadline impact your taxes — don’t worry, we’ve rounded up some of the top tax questions below to help get you the answers you need.
When is the federal tax deadline?
The federal tax filing deadline has been extended to July 15, 2020. As the IRS expects to continue to process refunds as normal, taxpayers who are getting a refund are encouraged to file now to get their money.
Will my refund be delayed?
No, the IRS expects to continue to process refunds as normal and still plans to issue nine out of 10 tax refunds within 21 days or less from acceptance with e-file and direct deposit — the quickest way to get your refund. Last tax season, nearly 72% of taxpayers received a tax refund close to $3,000. For many, this is their largest paycheck of the year and much-needed at a time like this.
Do I need to do anything to be eligible for the July 15 deadline extension? Do I need to file a tax extension?
No, the July 15 federal tax deadline applies to all taxpayers. You don’t need to file any additional forms or call the IRS to qualify. All you have to do is file and pay any tax due, if you owe, by July 15.
Will I get a penalty for paying my taxes after April 15?
The extension of the federal tax filing deadline also applies to tax payments. Taxpayers that owe money can defer federal tax payments, interest free and penalty free until July 15. This deferment applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax. Taxpayers can defer tax year 2019 federal tax payments regardless of the amount owed. This deferment also applies to tax year 2020 estimated tax payments previously due on April 15, 2020.
Deferment of federal tax payments means that if you owe money on your federal taxes, you will get more time to pay what you owe.
I heard there is a stimulus package, am I eligible for it and will it impact my taxes?
Yesterday, the Senate passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a $2 Trillion coronavirus stimulus bill. The stimulus package, which will now go to the House for passage, currently includes a recovery rebate in the form of a refundable tax credit. If passed, the credit could mean up to $1,200 for individuals and $2,400 for joint taxpayers, plus $500 for qualifying children.
Will my state taxes have a different tax deadline?
A majority of States will be conforming to the new federal deadline of July 15. However, a few states have differing deadlines and guidance. You can get the latest on tax deadlines and guidance for your state by clicking here.
What’s the deadline to make a contribution to my IRA?
The deadline for making contributions to your Individual Retirement Account (IRA) for 2019 has been extended to July 15, 2020. You can contribute a maximum of $6,000 to an IRA for 2019, plus an extra $1,000 if you are 50 or older.
If you are self-employed, you can contribute to a Simplified Employee Pension (SEP) IRA as much as the lesser of 25% of your net earnings or up to $56,000 for 2019 and your contributions may be tax-deductible as a business expense. You can contribute to your SEP IRA until the October 15 extended deadline.
Does this relief mean I have more time to contribute funds to my HSA or Archer MSA for 2019?
Yes. Contributions may be made to your HSA or Archer MSA any time during the year as long as it’s by the due date for filing your tax return. Given the due date for filing federal income tax returns is now July 15, 2020, you have until then to make contributions to your HSA or Archer MSA.
Has the 2020 Quarterly estimated tax deadline been moved?
While the notice postpones the deadline for first quarter 2020 estimated income tax payments from April 15 to July 15, 2020, second quarter 2020 estimated tax payments are still due on June 15, 2020.
One little-known tip for Self-Employed taxpayers is that you can annualize your income. By annualizing, you can recognize your income in the specific quarters you receive it and annualize at the time of filing so you don’t get penalties if your self-employment income was not earned evenly over quarters.
I already scheduled my tax payment for April 15th, can I move it to July 15?
Yes, you can cancel your payment and reschedule it for July 15. You will need to contact the U.S. Treasury Financial Agent at 888-353-4537 to make that change. Changes to payments need to be made no later than 11:59 p.m. ET two business days prior to the scheduled payment date.
What should I do if I’m unable to file my 2019 tax return by the July 15 deadline?
If you can’t file by the July 15 deadline, you can request an automatic extension to file your federal income tax return until October 15. Reminder, a tax extension does not extend the deadline to pay any taxes that you may owe to the IRS. Any tax payments will still be due on July 15.
Are Federal Loans Available to Help?
Information is available here:
Loan application is available here:
Is there Student Loan Payment Relief?
Under the CARES Act, employers can still make student loan payments on behalf of their employees on a tax free basis, up to $5,250 annually. This means the loan payments would be excluded from the employee’s income. The provision is applicable on loan payments an employer makes from the day the bill was signed into law (March 27, 2020) through Jan. 21, 2021.
Is there an increase in Unemployment Payments?
Unemployment payments will be increased by $600 weekly for four months through July 31, and the bill also includes those who were previously not eligible for unemployment, including part-time employees, freelancers, independent contractors, gig workers, and the self-employed.
Is there Financial Assistance Provided for Eligible Non-profits and Self-Employed Individuals
The Small Business Administration’s loan program is now accessible to more businesses and has an increased cap on loans. This Act provides $349 billion for the Small Business Administration to distribute through a new loan program titled the Paycheck Protection Program (PPP), making non-profits, self-employed individuals and contractors eligible to receive assistance.
The Federal Reserve lending program will also receive $454 billion in support — loans from this fund will be for no longer than 5 years and will be aimed at aiding nonprofits and businesses with around 500-10,000 employees with the goal of retaining at least 90% of their workforce with full compensation and benefits.
Is it true that the Penalty is Waived for Early Retirement Withdrawal ?
If you need to take money out of your retirement plan ASAP, keep in mind that the 10 percent early withdrawal penalty will be waived on up to $100K of retirement funds withdrawn.
Additionally, income attributable to such distributions would be subject to tax over three years, and you may recontribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions.
Is there a Delay of Social Security Payroll Tax Payment for Employers?
Employers, including the self-employed, can delay the payment of the employer portion of the Social Security payroll tax for the remainder of the year and pay back the liability over the next two years.
Information is changing daily, as the detail of the many programs are being released, therefore this information is valid as of the date of publish.
This brief summary of the tax reform act is provided for your information. Any major financial decisions or tax-planning activities in light of this new legislation should be considered with the advice of a tax professional. Call 805.389.7300 if you have questions regarding your particular situation.
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