The coronavirus pandemic (“COVID-19”) moved the deadline for filing your federal tax return to July 15 and many states, including Louisiana, matched that deadline for filing state returns. But tax returns are being filed at a slower rate than previous years, according to the Internal Revenue Service. As of June 5, 2020, 135 million individual income tax returns had been filed as opposed to 144 million in 2019. The good news is that many taxpayers are receiving refunds, and the average refund is $ 2,769.
EXPECTING A REFUND?
Of course, giving up your weekend to get your paperwork in order is worth it if you are due a refund. The fastest way to receive your refund is to file your tax returns electronically and have your refund deposited directly into your checking account. Whether you file electronically or on paper, a direct deposit gives you access to your refund faster than a paper check. Also, remember a paper check can be lost or stolen or could be returned to the IRS as undeliverable
CAN’T MAKE THE DEADLINE?
If you don’t think you can have your tax returns ready and filed by July 15, you can still request an extension. Filing a tax extension is free and can easily file Form 4868 electronically. Just make sure you file it before July 15. Many people file for an extension because they believe this gives them an extension to pay their taxes. This is the wrong reason for filing an extension. Filling an extension when you owe taxes only gives you more time to file, not more time to pay.
One advantage of filing an extension is that you can avoid failure-to-file penalties, which can add up to 25% of the tax due. If you file an extension but miss the extended deadline, you will still be subject to this penalty.
An extension will allow you to take advantage of retroactive changes to the tax law that might be made after the filing deadline, without the added time and expense of filing an amendment. Finally, some tax professionals theorize that filing an extension may decrease your odds of being audited. This theory is based on the assumption that IRS auditors try to make their quotas early in the year. While we do not advise you to file an extension unless you need to, it makes sense that the earlier a return is filed, the longer it is in the system, and thus, the more subject it is for an audit.
CAN’T PAY THE FULL AMOUNT DUE?
If you are unable to pay your full taxes, the IRS does offer some payment alternatives. If you can request a short extension to pay, of 60 to 120 days, you will still pay penalties and interest but at a lower rate. The IRS also offers installment agreements for taxpayers who can’t pay their taxes when they are due. An installment agreement lets you pay a set amount per month until the tax is paid. Finally, the IRS suggests you consider paying your tax due with a credit card or loan. In many cases, the interest on these accounts will be lower than the combined penalties and fees you’ll pay the IRS.
If you pay quarterly estimated taxes, the deadline to pay your taxes due for the first and second quarter of 2020 is July 15. Before COVID-19, the deadline for paying taxes due in the first quarter was April 15, and for the second quarter was June 15.
For Americans who live and work abroad, the deadline to file their 2019 tax return was June 15 and now must file by July 15.
DEADLINE ON MAKING CONTRIBUTIONS
The good news is you have until July 15 to contribute up to $6,000 in your IRA account plus an additional $1,000 if you are over age 50. This contribution will help decrease your liability for 2019.
If you normally save in a Health Savings Account on a pre-tax or tax-deductible basis, you can contribute up to $3,500 for self-only coverage and $7,000 for family plans. HSA Account holders over the age of 55 can put in an additional $ 1,000
At Estess CPAs, based in the New Orleans area, we specialize in serving the needs of individuals and small businesses with tax planning, accounting, bookkeeping, and payroll services. Call us today and schedule an appointment our Belle Chasse or Luling offices:
7822 Highway 23 128 Lakewood Drive
Belle Chasse, LA 70037 Luling, LA 70070
(504) 433-5122 (985) 785-1470