Mary Lee Miller EA, LLC April 1, 2020

 

COVID-19: Tax Season Delayed Until July 15

– Wait or file now?

 

 

As you know, the COVID-19 pandemic has shut down

much activity in the United States.

 

The IRS decided to use its authority in a national emergency

to postpone certain tax return filings and payments. This

change affects every one of you, and the rules are tricky—

after all, this is tax law.

 

We’ll explain who gets relief; what the IRS postponed; and

perhaps more important, what wasn’t postponed. We’ll also

tell you whether you should file regardless of the postponement.

 

Who Qualifies?

 

First, to qualify for postponement, you must have a tax return

that is due on April 15, 2020. In general, the returns due on

April 15 include the following:

 

  • An individual filing a Form 1040 series return
  • A trust or estate filing Form 1041
  • A partnership filing Form 1065
  • A corporation filing a Form 1120 series return

 

Second, you must have one of the following due on April 15, 2020:

 

  • Tax year 2019 federal income tax return
  • Tax year 2019 federal income tax payment
  • Tax year 2020 federal estimated income tax payment

 

This grant of relief does not apply to

 

  • federal payroll taxes, including federal tax deposits, and
  • federal information returns.

 

Federal Tax Return Filing Deadline

If you qualify for relief, your 2019 federal income tax return

is now due July 15, 2020. The extension is automatic. You do

not have to file an extension.

 

If you need additional time beyond July 15, 2020, to file your

tax return, you can file extensions (Form 4868 or Form 7004 on

or before July 15, 2020), and get an automatic extension to your

normal extension due date :

 

  • September 30 for Form 1041-Fiduciary Tax Return
  • October 15 for Forms 1040 and 1120

 

IRA, HSA, and Retirement Plan Payments

 

The COVID-19 grant of relief also postpones the following

payment deadlines until July 15, 2020:

 

  • 2019 individual retirement account (IRA) contribution
  • 2019 health savings account (HSA) contribution
  • 2019 employer qualified retirement plan contributions

 

Tax Payment Deadline

If you qualify for the relief, your federal income tax

payment is due July 15, 2020. This payment postponement

applies only to the following:

 

  • 2019 income tax return balance-due payments
  • 2020 income tax estimated tax payments that are due

April 15, 2020

 

There is no limit to the deferred amounts. Earlier guidance

provided a $10 million limit for C corporations and a $1 million

limit for other taxpayers, but the IRS eliminated these limits in its

updated guidance.

 

The relief does not provide for a waiver of 2020 estimated tax

payment penalties for not making the payment on the normal

schedule. But we’d expect the IRS to be generous in granting relief

when the time comes to file your 2020 tax returns.

 

If you already filed your 2019 tax return and scheduled a direct

debit payment, call the IRS e-file Payment Services 24/7 at

1-888-353-4537 to cancel your payment at least two business

days prior to the payment date.

 

Example 1

 

Sarah, who is single, owes $10,000 on her 2019 Form 1040. She

does not have a 2020 estimated tax payment requirement.

Sarah must

 

  • file or extend her 2019 Form 1040 by July 15, 2020; and
  • pay the $10,000 balance due for her 2019 Form 1040

by July 15, 2020 (even if she extends to October 15, she

has to pay by July 15, 2020).

 

Example 2

 

Jake and Karen’s 2019 Form 1040 shows a refund

of $1,500. They have a 2020 estimated tax payment

requirement of $2,000 per quarter.

 

Jake and Karen must

 

  • pay $2,000 for their second-quarter estimated

tax payment by June 15, 2020 (yes, June 15—

strange but true);

  • file their 2019 Form 1040 or extend it by

July 15, 2020; and

  • pay $2,000 for their first-quarter estimated tax payment

by July 15, 2020 (yes, the second quarter was due on June 15).

 

Should You Wait?

 

If your tax return shows a refund, file it as soon

as possible—get your cash as quickly as you can.

 

If you have the cash and liquidity to make your tax

payments on April 15, 2020, but keeping those payments

in your bank account earns extra interest income,

we see no reason you shouldn’t delay until July 15, 2020.

 

If you have problems with making timely estimated

tax payments, we recommend you keep the normal schedule

as long as you have the liquidity and cash to make the payments.

We don’t want you to fall into bad habits and possibly create

an unpayable balance due on your 2020 tax return.

 

Be safe and take care.

 

Mary Lee Miller EA, LLC