5 Keys to Navigate Tax Filings And Your Stimulus Check During COVID-19
Amidst the COVID-19 pandemic, there’s been some confusion regarding tax filings, payments and extensions (myself included). Thankfully I have my sources. As of March 20, 2020, the Department of Treasury made a few announcements, and the IRS confirmed such changes on their website. There are a few curveballs you must be aware of in order to be eligible for the incentives provided by the Department of Treasury and the Internal Revenue Service, so I’m here to share those curveballs with you.
Here are five important announcements to help you keep abreast of the tax world:
- IRS extended the federal tax filing deadline from April 15th to July 15th.
The Treasury Department and Internal Revenue Service announced the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020. You do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment relief. If you need additional time to file beyond the July 15th deadline, you can request a filing extension by filing Form 4868 through your tax professional or using the Free File link here. Business owners who need additional time must file Form 7004 as well.
- Federal income tax payments due on April 15, 2020, are now due on July 15, 2020.
You heard that right, you can defer federal income tax payments due on April 15, 2020 to July 15, 2020, without penalties and interest, regardless of the amount owed. This deferment applies to all individuals, trusts and estates, corporations, and other non-corporate tax filers. This extension applies to those who pay self-employment tax. The payment extensions are only for monies with a due date of April 15th, 2020. The easiest way to schedule payments is to set up an account on irs.gov, (here is a video of how to set up your account), and input your payment information. This video will also show tax filer's different options for payments.
- State tax filings extension
The federal filing follows suit of the Department of Treasury. The state follows the suit of the Governor. So, while the federal government has enacted tax extensions and deferment on penalties and fees, your state may or may not follow the same protocol. As of now, only the state of California, Maryland, and New York has agreed to extend the payments and tax deadlines. To learn more about how your state will provide any relief, head here for info by the AICPA organization.
- Federal Economic Stimulus check in response to COVID-19
The White House and Senate leaders struck a major deal early Wednesday morning on March 25th over a $2-trillion package to provide a jolt to the economy. Under the plan as it was being negotiated, individuals who earn $75,000 in adjusted gross income or less would get direct payments of $1,200 each, with married couples earning up to $150,000 receiving $2,400 -- and an additional $500 per each child (unclear if there is a cap on # of children). The payment would scale down by income, phasing out entirely at $99,000 for singles and $198,000 for couples without children.
For those who filed 2019 tax returns, the IRS will use this information to calculate the amount. For those who have not yet filed their return for 2019, the IRS will use information from their 2018 tax filing to calculate the amount. The stimulus check will be deposited directly into the same banking account reflected on the return filed. The stimulus checks are expected to go out around mid-April through the end of the year. It will be dispersed either through direct deposit info provided to the IRS for your refund or sent via mail with your registered address.
- 2016 Tax Return refund expiry date
If you or someone you know hasn’t filed their 2016 taxes, you're in luck. There is a deadline to file a 2016 return for a refund by July 15th, 2020. If you don't, that refund will become the property of the Department of Treasury. If you will owe, create a payment plan as soon as you can.
Although the federal tax filings and deferments on tax liabilities are in effect, have a plan. File your tax returns, e-file, and request direct deposit. It’s the easiest, secure and safe way of completing your tax return to ensure accuracy and timely delivery of any refund owed. If you owe a balance this would be a great opportunity to pay as much as you can before the interest and fees are activated after July 15th. This is an opportunity to pay towards the principal reducing your debt. Also, if you have not filed any back return from 2016 by July 15th, it will become the property of the Department of Treasury. To receive the stimulus check in April, your 2018 would have to be filed as that tax year filing will determine the amount of the check you would receive.
Finally check with your tax professional or site to find out the status of your state filing as well.
If you’d like to learn more corona tax relief, check out https://www.irs.gov/coronavirus.