What You Need to Know About the Quickly Approaching July 15 Tax Filing Deadline
Your tax return will be due before you know it.
As daily life eases back to some semblance of normalcy, Americans are now facing the sobering reality of having to file their taxes. Unlike most weddings and vacations, this pesky chore did not get canceled this year, but the filing date (aka, the end of tax season) was delayed for everyone. Here’s what tax experts say the July 15 deadline to file taxes means for you this year and next year, when you’ll have to file your 2020 taxes.
What’s with the new deadline?
The decision to extend the country’s filing deadline came down from the federal government for a few reasons, chief of which was the difficulty the IRS would soon face in processing the returns while working remotely during the coronavirus crisis.
“This is very unique, very much a first of its kind,” says Mark Jaeger, director of tax development at TaxAct. “In some disaster relief areas it’s been delayed, but not like this for the whole country.”
Lockdowns in major cities also made meeting with your tax accountant difficult, if not impossible, in many places.
“It’s not so much for the do-it-yourself filers but for folks who work with tax preparers,” Jaeger says. “They didn’t want people going to find their accountants during the highest levels of this pandemic, so they gave it a few months to see where things fell and give accountants more time.”
Of course, if you’re used to filing remotely, filing your taxes likely went smoothly. Challenges in the actual process of filing weren’t the only reason the IRS delayed the tax filing deadline, though. Nathan Rigney, lead tax research analyst for H&R Block’s Tax Institute, says the IRS was also concerned about taxpayers being able to pay what was owed on their taxes this year, in light of the major impacts to the economy.
“The IRS also extended the payment deadline to July 15, allowing taxpayers who were not entitled to a refund a few more months to come up with cash needed to cover the balance due,” Rigney says.
What if I’ve already filed my 2019 taxes?
If you filed your 2019 taxes on schedule this year, and well before the announcement of the country-wide deadline extension, you’re definitely ahead of the game. Jaeger says you can expect to get your refund sooner than the rest, if you haven’t already, and you’ve likely avoided the headache of the new deadlines and the confusion surrounding them.
“If you were expecting a refund, then getting your money back and having it in your bank account is the biggest perk,” Jaeger says. “If you filed early, the IRS also had more up-to-date data to get your stimulus check faster. The other perk, which I’ll always say, is just peace of mind.”
But if you filed prior to the March 21 announcement and later lost your job or wages because of COVID-19 fallout, you might be facing some financial difficulties compounded by what you owe for your taxes this year. If you’ve lost income since filing, it might have been advantageous to file closer to the extension, just to see how your financial situation played out.
“Unfortunately, if you owed money and you paid it before the April 15 deadline, the disadvantage is that you could have saved that money and had it available to you through the pandemic,” says Christina Taylor, head of operations at Credit Karma Tax.
Still, there’s another perk to filing your taxes early this year (and every year).
“Early filers are also less likely to be a victim of stolen identity tax refund fraud, which occurs when a bad actor uses your social security number to file a fraudulent tax return,” Rigney says. “That’s because the IRS e-file system only allows one return to be filed with the same Social Security Number.”
If you’re still filing...
If you’re still trying to meet this year’s tax deadline on July 15, don’t try to avoid making payments by delaying filing longer.
“If you’re worried about owing money, just try to file by July 15,” Taylor says. “The IRS is considering more people for an offer in compromise, where you can propose a lower amount and they can forgive your debt. You can likely set up an installment payment plan with them, too. Just don’t do nothing because the taxes won’t go away. You’ll still owe when you file.”
Once you’re ready to file, Taylor recommends e-filing your return. That’s one way to ensure it’s received quickly and processed in a timely fashion as the IRS scrambles to process a backlog of returns. Request a direct deposit, as well, since waiting on a paper check will take more time. You can typically expect an electronic refund within 10 to 14 days of filing.
“They’re way behind on processing paper returns,” Taylor says. “Some IRS employees are telecommuting. They actually have warehouses full of tractor trailers storing documents that they haven’t been able to get to. From what I’ve heard, it could take months to get a return if it was paper filed.”
If you’re nervous about filing electronically, Taylor suggests at least sending your tax return in via certified mail. That way, you’ll know when it was received, and the IRS will be able to tell that you submitted prior to the deadline.
If you’re still scrambling to meet the extended deadline, you can file for an extension through October 15. That’s the typical deadline for Americans in a normal year who file for extensions prior to April 15, Jaeger says.
If you miss this July extended deadline and fail to file for that extension, you could face fines and penalties. But that’s typically only if you’re expecting to owe the government taxes. The IRS is understandably more lax for folks who miss the deadline but are expecting a refund check from the government.
If you’re a freelancer or independent contractor, you’re probably used to paying quarterly taxes. With this year’s regular filing extension, the quarterly taxes for the first two quarters of 2020 were both postponed to July 15, 2020, as well, as folks sort out their finances, Taylor says.
How does COVID-19 affect my taxes this year?
Aside from the new deadline, the short answer is that COVID-19 won’t really affect any other aspect of filing this year. Instead, most of the headaches related to this pandemic will play out next year as Americans file for their 2020 taxes. That’s when considerations such as unemployment, small business loans, and stimulus checks will come into play.
The good news is that you won’t owe taxes on your stimulus check and the money you received from the government. But Jaeger said there will be a recalculation in 2020 in regards to the stimulus. Thankfully, you can only benefit from this, and the IRS won’t penalize you if it turns out you were owed less than what you received.
“If you had a baby in 2020, you might get more of a stimulus on next year’s return for a life event change,” Jaeger says. “The government only knows what it knows at the time that you last filed.”
The bad news is that you will be taxed on that increased unemployment you’ve been receiving, if you filed for unemployment benefits and received the additional money. To avoid a huge tax burden come next tax season, Taylor says it’s important to begin putting a fraction of that income aside, if you haven’t already done so.
“I’ve heard a lot of people say they don’t think it’s taxable or they think there will be something passed to make it not taxable,” Taylor says. “But it’s really important for people to understand that if they’re receiving the extra $600 a week in federal unemployment for as long as it’s available, that’s an additional $9,600 they’ll owe taxes on.”
Another interesting shift in this year’s taxes is that you can contribute to your IRA and HSA through July 15, 2020, as well, counting those contributions for the year 2019. Normally contributions for any given year are open from January to April of the following year; now you can count contributions from January 2019 through July 2020, so if you’ve been trying to max out those accounts, you still have some time.