Due to the Covid-19 pandemic, businesses were forced to close, and jobs were lost. So, the federal government has extended tax season to give citizens a break, moving Tax Day to July 15. What does this mean for millions of middle-class Americans? Taxes can be confusing, and more so now with the unprecedented changes. To clear the confusion, I’ve simplified and condensed what you need to know about 2020 tax extensions into three key considerations.
The New Deadlines
We are almost halfway through 2020, and many of us have no idea where we are on our taxes. If you fall into that category, there are a couple of important dates to mark on your calendar that you do not want to miss. The first is July 15, the deadline to file your individual tax returns. Time is ticking on this, so if you haven’t already begun the process, now is the time to do so. For those seeking a filing extension, October 15 is another important date to note.
How To Request A Valid Extension
If you need time to file beyond July 15, you must use Form 4868 to initiate the request for a valid extension of filing time with the IRS. This extension form needs to be postmarked on or before July 15. In addition to filing the extension on time, you need to correctly estimate the tax due. An extension is not valid if the estimated tax liability is not accurately displayed on the form. With a valid extension, the new filing deadline for individuals is October 15.
The Due Date For Paying Taxes
It’s important to note that an extension of time to file is not an extension of time to pay. The IRS allowed for the waiver of penalties and interest during the additional extension time period of April 15 to July 15. But it is worth noting that this waiver of penalty period ends July 15. This means if you owe the IRS, you need to pony up by July 15 to avoid any additional penalties and interest. Even with a valid October 15 filing extension, the balance on your 2019 taxes is due July 15. Now is a good time to review your tax liability, not only based on your numbers as of December 31, 2019, but also based on all the tax law changes in the CARES Act that are retroactive to 2019.
All the new tax law changes and the extension of time to file can make getting your 2020 house in order a bit cumbersome. Remember that your 2019 tax liability also drives the amount of estimated tax you may need to pay if you are required to pay estimated taxes. It is important to not only look at where you are for 2019, but to use that information to get you on track for 2020. Having up-to-date and accurate information is a key ingredient in ensuring you avoid penalties, interest and the “big A” — audits.