The international coronavirus (COVID-19) pandemic has flipped our world upside down in almost every way possible. And Tax Day 2020 is no exception.
While tax day in the United States has traditionally been on or around April 15 – dating back to 1955 – this year represents a break from the norm. Due to the wide-scale financial and organizational disruption caused by the coronavirus pandemic, the IRS made the decision to give taxpayers a bit of relief when it comes to this year’s tax filing and payment deadlines.
Because April 15 has come and gone, you may already know that the federal tax deadline for this year has been extended. And as you’re social distancing and spending more time at home than usual, it may be a good opportunity to get started on your tax return if you haven’t already.
As you prepare your taxes, keep the following information in mind as this year’s tax deadline approaches. And even if you did file before the original April date, some of this information may still be helpful to you.
The Federal Tax Deadline is Now July 15, 2020
Instead of April 15, taxpayers now have until July 15, 2020, to file and pay their federal tax returns. There will be no penalties or interest charged to taxpayers in this situation. Such an extension by the IRS is rare but not entirely unprecedented. During a 2007 April Nor’easter storm, the IRS allowed a 2-day filing extension to certain heavily affected regions.
But the coronavirus pandemic has warranted a much longer, much more widespread extension of 90 days. According to Treasury Secretary Steve Mnuchin, the move was designed to keep more than $300 billion circulating in the economy during this time.
It’s Still Best to File as Soon as Possible
Whether you owe taxes or receive a tax refund, filing your taxes as soon as possible can be an advantage to you in either scenario.
If you end up owing money in taxes to the federal and/or state government, filing early means you have more time to come up with the money that’s owed. Just because you file your taxes right now doesn’t mean you have to pay right away. That July 15 deadline still applies, but at least you know how much you owe so you can set it aside.
If you are eligible for a tax refund, that money may be a welcome source of income during these difficult times. The sooner you file, the sooner you can receive that refund. Similarly to the issuance of the coronavirus federal stimulus checks, you may receive your refund via check or direct deposit. You will generally have the option to choose as you wrap up your return.
As of April 3, 2020, the average American taxpayer’s refund amount was $2,878, according to data by the IRS. If you’re able to cover daily expenses and potential unexpected costs due to the coronavirus pandemic, you may want to consider using some money from your return to start an emergency fund.
Be Sure to Check Other Tax Deadlines
Although we generally think about our federal and state taxes at the same time, it’s important to remember that they’re separate. While almost every state has amended its deadline to match the new federal date of July 15, it’s not the case for every state.
In Missouri, Kansas, Colorado and Arizona, the state deadlines have been moved to July 15, as well. However, to find up-to-date information and more specific information about the states’ rulings, you can visit the State Tax Filing Guidance Chart from the American Institute of Certified Public Accountants. The chart tracks every state’s deadlines and coronavirus-related relief provisions and provides frequent updates.
If you’re self-employed and/or are accustomed to making quarterly estimated tax payments, keep in mind that the deadlines for the quarterly payments may have changed in accordance with the new tax date as well. While taxes for the previous months are generally due on April 15 or June 15, this year taxpayers may have more time to pay estimated taxes.
A year’s typical estimated tax payment schedule:
- 1st Quarter – April 15, 2020 (May have been extended from April 15, 2020, or fees and interest waived if paid by July 15, 2020)
- 2nd Quarter – June 15, 2020 (May have been extended from April 15, 2020)
- 3rd Quarter – September 15, 2020
- 4th Quarter – January 15, 2021
IRA Investment Deadlines Have Moved
With the date change, the deadline for making a contribution to an individual retirement account (IRA) for 2019 also has extended to July 15.
If you have the financial means to and didn’t max out your IRA contribution ($6,000 in 2019), this change can be extremely helpful. You can continue to make contributions for 2019 and potentially reduce your tax burden while maximizing your investments.
Be Aware of Tax Scammers
Even in a “normal” tax season, cyber criminals often target taxpayers in an attempt to scam them with tax-based intimidation or identity fraud. The uncertainty and financial pressure caused by the coronavirus pandemic may leave many people more vulnerable to falling for these scams.
The filing extension also leaves more time for cyber criminals to do their dirty work. Another reason it’s best to file as soon as possible – it means a scammer can’t use your Social Security number before you do.
Throughout the remainder of this year’s tax season, stay vigilant and be sure to follow safe online practices. If something doesn’t feel right, report it. And you can always contact the IRS for more information if you’re not sure.
From answering your questions about tax day 2020 or your coronavirus stimulus check, to helping keep your financial accounts secure, Academy Bank is working to be your go-to financial partner.