Under normal circumstances, if you hadn’t filed your taxes by now, you’d probably be looking at a couple “failure to” penalties. The penalty for not filing taxes is typically 5% of the tax you owe for each month your return is late. Not paying what you owe would normally tack on an additional 0.5% each month.
Tax day has been April 15th for more than 60 years, but that has now changed following the sweeping setbacks due to the coronavirus pandemic. On March 21, 2020, the Treasury Department and Internal Revenue Service announced that the deadline for filing federal income taxes would be automatically extended to July 15, 2020. This gives taxpayers more time to prepare, file, and pay any tax bills they might owe.
As you prepare for the new deadline, there are some things to keep in mind.
Let’s take a look.
6 things to consider as you prepare for the new July 15th tax deadline
The deadline for filing your federal income taxes has been extended to July 15, 2020. If you’ve already filed but haven’t paid your federal tax bill, you also have until July 15, 2020, to make your payments without any penalties or interest charges.
If you’re taking advantage of the new tax deadline, here are six things to consider.
1. Your state tax deadline
The announcement to extend the federal income tax filing deadline to July 15, 2020, came following the President’s emergency declaration a week prior, pursuant to the Stafford Act. The Stafford Act, short for the Robert T. Stafford Disaster Relief and Emergency Assistance Act, authorizes the federal government to provide assistance to states during declared major disasters and emergencies. Although this extension applies to federal income taxes, the due date for filing state income taxes isn’t the same across the board.
According to state tax filing information compiled by the American Institute of Certified Public Accountants, all states with a personal income tax have also extended their April 15th due dates. According to the document, 40 states extended their filing and payment deadlines to July 15, 2020. The others have varying deadline dates.
As you’re preparing your taxes, don’t forget to consider when your state taxes are due, as that deadline may differ from the new federal tax deadline. Check your state’s department of revenue website for tax information specific to your state.
2. If you expect a tax refund
The IRS is urging taxpayers who are due a refund to file sooner rather than later. According to the IRS website, the agency is still issuing most refunds within 21 days after accepting tax returns. Filing electronically is your best bet right now — more on that in a minute.
If you’re expecting a tax refund, filing early likely makes the most sense. This is especially true if you’ve recently experienced job loss or reduced hours. This will put money back in your pocket sooner and can help alleviate the financial burdens you, along with many Americans, might be facing.
3. ...But if you expect to owe
If you expect a tax bill, it may make more sense to wait until July 15, 2020, to file your taxes. Again, this is especially true if you’ve recently been laid off. A three-month extension without penalties or interest charges is worth taking advantage of if you’re currently experiencing financial hardship.
Of course, you can still file now if you’d prefer not to wait and your finances are in good shape. Getting your taxes out of the way will allow you to focus on other important matters during these strange times.
4. How you’ll file might be different
Because the IRS has closed many of its processing centers across the U.S. to comply with orders of local health authorities, they’re no longer able to process paper returns for the time being. As a result, the IRS is urging taxpayers to file electronically. If filing electronically is new for you, you’ll still need to gather all the same information just as you would if you were filing a paper return.
Using electronic options will speed up the processing of tax returns, refunds, and payments, the IRS said in a statement issued in early April. According to the agency, more than 90% of taxpayers have already filed electronically this year.
5. Quarterly tax deadlines may be unchanged
In a follow-up press release issued by the Treasury Department and the IRS on April 9, 2020, it was announced that even more tax deadlines would be extended. Estimated tax payments for the first quarter of the year normally due June 15 have also been extended to July 15, 2020. Tax payments for the third and fourth quarters so far remain unchanged.
For state estimated tax payments, it’s best you check your state’s department of revenue website to confirm whether deadlines have been extended. Some states are lockstep with the federal government; others are setting their own deadlines for quarterly taxes. Montana, for example, has postponed the first installment of 2020 estimated tax normally due April 15 to July 15, 2020. However, payments for the second quarter are still due on June 15, 2020.
6. Your tax preparer’s schedule
Just as your schedule might be different than it was a couple of months ago, so too may be your tax preparer’s schedule. They might be working with multiple clients, and given how rapidly the current environment is changing, it’s likely not as simple as it used to be to sit down and file someone’s taxes.
Although the deadline has been extended, if you typically work with a tax professional to file, reach out to them early to schedule a time to do your taxes.
What if the new July 15 tax deadline still isn’t enough time?
A three-month deadline extension for filing taxes should help a number of Americans as they traverse the current environment, but what if you need even more time?
According to the IRS, everyone is eligible to request an extension to file their tax return. Individuals who need an extension beyond July 15, 2020, can request one by filing Form 4868. You can do this through your tax preparer, using one of the best tax software programs, or the Free File link on IRS.gov. For businesses that need additional time, you’ll need to file Form 7004.
Although an extension to file may be available, you’ll still need to pay your taxes by the regular deadline (July 15, 2020) to avoid possible penalties. You can do this by making an estimated payment on any taxes you owe.
The final word on the new tax deadline
A lot has changed over the past couple of months. The tax deadline that has been in place for more than 60 years has been extended by three months to July 15, 2020, which gives you more time to file and pay your taxes. If you plan to take advantage of the new tax deadline, there are no penalties or interest charges for doing so.
If you’re due a refund, filing sooner rather than later is probably your best bet. This is especially true if you’re experiencing any sort of financial hardship or problems with how to manage your money. Now’s a good time to have as many resources as possible, and the sooner you get your refund, the better financial position you’ll be in.
Lastly, most states are following the federal government’s lead and extending deadlines to mid-July — some are even giving taxpayers until the end of July to file. However, you should check with your state’s department of revenue website to be sure as some state tax filing deadlines remain the same.