Tax Season 2020: Everything You Need to Know About Deferral
In response to the coronavirus pandemic, the Internal Revenue Service (IRS) extended the deadline for filing tax returns and paying any taxes - from April 15, the date was rescheduled to July 15, writes GOBankingRates. If you plan on taking a respite, that’s all you need to know.
Individual applicants may request an additional extension
Individual applicants who will not be able to submit documents before the new deadline still have the right to request an additional extension. To extend the deadline until October 15, you will need to fill out form 4868. You can submit a document through your tax specialist, tax software, or using the Free File on IRS.gov.
You do not need to request an extension until July 15
The tax period of 2019 was automatically extended until July 15 for all individuals, trusts and corporations. The new deadline is automatic - you do not need to submit any additional forms or call the IRS.
Deadline July 15 applies only to federal income taxes.
The new deadline is important for paying federal income taxes — it does not apply to income taxes you may owe to your state. Dates vary from state to state, so be sure to check with your local tax authority for the correct date.
The new deadline gives you 3 extra months to use the money
If you owe IRS money, you now have extra time to use these funds on your own.
“An additional three months will provide time for investing or using this money for other needs,” said Mark Wieder, one of the leaders of the real estate group at Anchin, Block & Anchin, an accounting firm.
This can be especially useful for those left without work.
The ability to pay taxes later may be especially useful for those who have lost their jobs or have faced wage cuts due to the coronavirus pandemic.
“Delaying filing tax returns and paying taxes for 90 days can be a big help for many people, especially if you were fired or had financial problems,” said Miguel Horvath, CFP, MSF, private welfare consultant at Ameriprise in Miami.
This gives you extra time to figure out how to file your electronic declaration.
“In today's new world of social distances and virtual meetings, some people who are not tech savvy may need extra time to figure out how to send information to their tax agent electronically,” Horvath said.
It’s in your best interest to file your tax return earlier.
“There is no reason to delay preparing your tax return,” said Gary Duboff, Director of Taxation and Accounting at MBAF. If you need a tax refund, the sooner you file, the better. If you owe money, you can file a tax return now and pay your tax bill on July 15th without interest, penalty or other sanctions. In any case, this is a great time to concentrate, gather information and send it to your tax specialist. ”
In any case, the tax refund will be within 90 days after filing
The sooner you apply, the sooner you will receive a refund, but the deadlines for receipt are likely to remain the same.
“The IRS usually refunds within 90 days of receiving the tax return,” Wieder said. “I suppose that will not change: if you submit an application earlier than July, you will receive a refund earlier.”
If circumstances have changed, expectation may mean less financial assistance.
Federal Coronavirus Financial Assistance, which the US Treasury sends to all relevant taxpayers, is based on your individual tax returns for 2019. If you have not filed your tax return for 2019, the payment will be based on your tax return for 2018.
“In most cases, this amount is likely to be the same because your income, registration status, and household probably did not change,” Duboff said. - However, if your income is very different, your filing status has changed or you had a baby in 2019, the payment may be more or less than based on the 2018 declaration. If you have not received your check yet, it is not too late to file your tax return for 2019 and receive the proper payment. ”
However, if you have already received the check based on the tax return of 2018 and in the end you will receive a different amount, you will receive the difference next year.
“If the final payment is different, a reconciliation will be made in the form of a loan when filing a tax return for 2020,” Duboff said.
The extension includes your estimated tax payments for the 1st and 2nd quarters of 2020
“Renewal is not just a later deadline for filing a declaration, but also a deadline for payment,” Duboff said. - The most important is that the extension also includes tax payments for the first and second quarter of 2020, which were to be paid on April 15 and June 15. Failure to make these payments before July 15 will not entail any interest or penalty. ”
The new term also applies to real estate and gift tax returns.
Other forms and terms of payment of taxes were extended
According to Bill Smith, managing director of the CBIZ MHM National Tax Office, the July 15 deadline now applies to a number of forms.
“For example, international forms, such as forms 5471 and 3520, which are information declarations rather than income tax declarations, have also been expanded,” he said. - Equivalent exchange transactions must be completed within 180 days from the sale of exchange property. Due to the fact that the coronavirus closed all operations with real estate, the people who were involved in these exchanges did not know whether the period of 180 days would be extended, since this is not a tax return. Similarly, capital gains should be invested in the Qualified Opportunity Zone fund within 180 days of the sale of the asset. The IRS extended both of these terms until July 15, along with many others. ”
But some deadlines did not extend
According to The Wall Street Journal, the deadline for July 15 does not apply to excise taxes and returns - for example, Form 1099 - and some payroll taxes.
IRA fee deadline also extended
The IRS also extended the term for contributions to the traditional IRA, Roth IRA, Health Savings Account, and Archer MSA until July 15.
“This gives you another 90 days to find the money to contribute to your IRA for 2019,” said Horvath. “This will not only help you save on taxes, but also help you retire, and that’s a win in every way.”
Checks will also be delayed.
If you are afraid that tax officials might check you, you have three more months to put your documents in order. The Wall Street Journal reported that the IRS, as a rule, will not begin new inspections and will suspend personal meetings with taxpayers who are under investigation until July 15.
On the subject: Taxes in 2021: 10 Important Innovations to Know About
Other measures suspended
In late March, the IRS launched the People First initiative to facilitate regulatory compliance. Changes include the suspension of payments under installment agreements from April 1 to July 15 and the suspension of the seizure of property based on collateral and fees for the same time period.
Renewal applies to early withdrawal fines
If you used an early withdrawal from your retirement account in 2019, you now have a deadline of July 15 to pay any fines.
Until July 15, you need to apply for a refund of unclaimed taxes from 2016 and later
Americans who have not filed tax returns in previous years may miss unclaimed tax refunds. Taxpayers usually have a three-year opportunity to claim a tax refund. For tax returns in 2016, the window closes on July 15, 2020.
You must not miss the deadline of July 15
Although using an additional 90 days is perfectly normal, Duboff does not recommend submitting documents later than July 15, 2020.
“If you have the opportunity to complete the filing of declarations before July 15, you will be in a better position,” he said. - The added three months will give tax authorities more time to process documents. "Accountants and tax inspectors will be under great pressure to complete their work, which will force them to work in a much shorter and shorter time frame than usual."
If you miss a new deadline and do not apply for an extension, pay a fine
“We encourage customers to file tax returns on time - July 15 for individuals or October 15 with an extension of the filing deadline,” said Mike Savage, CEO of 1-800Accountant. “The penalties for violations are pretty significant.”
Even if you cannot pay all your debts on time, you still have to file your documents on time.
“There are repayment options, such as installments,” said Savage.
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