A question a lot of people are asking is: “How does the change of the 2019 tax filing deadline affect me?”
Typically, AllGen’s MoneyMinute series focuses on topics or questions that aren’t time-sensitive. However, this particular question is an exception. We are currently experiencing the coronavirus, or COVID-19, pandemic, which is impacting everyone. Because this has resulted in economic disruption due to businesses temporarily closing, the government has enacted legislation to help ease the financial burden.
Tax Filing Deadline Extended to July 15
The coronavirus legislation allows, this year, the tax filing deadline to be moved back to July 15. Typically, you file your personal taxes on April 15, unless you ask for an extension. This year, your 2019 taxes, which would have been due April 15, 2020, are pushed back to a deadline of July 15, 2020.
This means that you don’t have to file until July 15, 2020 for your 2019 taxes.
Interest Accrual on Past Tax Extensions
Why is this deadline change such a big deal? In the past, taxes were due April 15. If you file for an extension, a personal tax return could be filed as late as October of that same year. However, you would still be responsible for any taxes owed. If you owed money on your tax return, you would still owe that money by April 15, or interest would accrue until you actually filed your return and paid it.
2020 Tax Payment Extension
What is so important about this coronavirus legislation is that not only was the filing deadline extended, the payment deadline was as well. If you owe money on your tax return, the payment isn’t due until you actually file on July 15. Plus, no interest or penalties will be accrued.
Does the Deadline Change Affect IRA Contributions?
This is a big deal for a lot of people because not only does it provide more time for you to gather all of your information, but it also gives you more time to, if you owe money, get the money together to pay your taxes.
It also gives you more time to fund an IRA. Normally, even if you applied for an extension, your IRA would need to be funded by April 15. Now, you can wait until July 15 to fund an IRA, giving you more time to potentially minimize your tax hit.
Who Does the Coronavirus Legislation Help?
According to the IRS, the coronavirus stimulus bill extended the tax deadline to July 15 for anyone, from individuals and trusts to corporations and estates, who have to file a tax return. The deadline extension for both filing and payment of 2019 taxes applies to everyone who files taxes, regardless of how the coronavirus may have impacted you. You don’t have to have contracted the virus or be quarantined in order to qualify for the deadline extension.
Who Should Take Advantage of the Extension?
If you’re expecting to receive a refund, you should file your taxes as soon as possible. That way, you can get the money sooner. The exception is if you want to increase the size of your return by making contributions to an IRA or HSA or other account. If you expect to owe taxes, this deadline extension can be helpful if you need more time to save the money to pay your taxes.
What If I Pay Estimated Taxes?
If you pay estimated taxes, the IRS states that the first quarter taxes, which are due on April 15, are now due on July 15. However, the second quarter taxes would still be due on June 15. For those paying quarterly estimated taxes, this could be either advantageous or disadvantageous. While you would have more time to save the money to pay the first quarter’s taxes, you would also have to pay two quarters’ worth of taxes in closer succession than if you paid the first quarter’s taxes earlier.
AllGen does recommend that you consult with your accountant or CPA to discuss your individual circumstances on everything related to taxes (including your circumstances pertaining to the deadline extension) before making decisions.
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