The Treasury Department and Internal Revenue Service recently announced that the federal income tax filing due date had been automatically extended from April 15, 2020 to July 15, 2020. Saturday’s release updated the notice issued on March 18th that payments could be deferred but not filing.
The deferred deadline applies to all taxpayers (individuals, trusts and estates, corporations, self-employed individual, and certain non-corporate taxpayers). These same taxpayers can also defer income tax payments due on April 15th to July 15th without penalties or interest. There is no limit on the amount that can be deferred. This includes estimated income tax payments due April 15th and payments of self-employment tax. On April 9th, the IRS announced that second quarter estimated tax payments due on June 15th are also extended until July 15th.
You do not need to take any action to qualify for this automatic extension. For example, individuals normally file Form 4868 to extend the filing deadline for their personal tax return. This is not required. If you need an additional extension beyond July 15th, you will be required to file the appropriate extension form (Form 4868, 7004, etc.) Presently, there is no option to defer payment beyond July 15th.
Most states are following the federal government’s lead by mirroring the federal extensions. However, there are some differences. Please check these resources from the American Institute of Certified Public Accountants and the Tax Foundation for information pertaining to your state.
On March 24th the IRS also provided clarity (see Q17 and Q20) regarding certain retirement plan contribution deadlines. Since the due date of 2019 federal income tax returns has been extended to July 15th, the deadline to make 2019 IRA and Roth IRA contributions is also extended to July 15th. The same applies to 2019 profit sharing contributions to SEP IRA’s and individual 401(k)’s.
So, what should you do?
- If you expect a refund, you should file your income tax returns as soon as possible. The IRS indicates that at the present time most refunds are still being issued within 21 days.
- If you expect a balance due, or regularly pay quarterly estimated tax payments, it would still be beneficial to complete as much of your tax return as possible. This will allow you to estimate the cash you need to set aside for payment in July. You might even think about moving these funds to a separate account.
Should you have any questions about how the filing and payment deadlines please contact your Wealth Manager.
This material has been prepared for informational purposes only and should not be used as investment, tax, legal or accounting advice. All investing involves risk. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You should consult your own tax, legal and accounting advisors.