The Treasury Department and the Internal Revenue Service provided special tax filing and payment relief to individuals and businesses in response to the COVID-19 outbreak.
The 2019 income tax filing and payment deadlines for all taxpayers who file and pay their Federal income taxes on April 15, 2020, are automatically extended until July 15, 2020.
This relief applied to all individual returns, trusts, and corporations. This relief is automatic, taxpayers did not need to file any additional forms or call the IRS to qualify.
This relief also includes estimated tax payments for tax year 2020 that were due on April 15, 2020.
Since it is mid-June, the filing and payment holiday is now less than 30 days from expiration. Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. You will automatically avoid interest and penalties on the taxes paid by July 15.
Individual taxpayers who need additional time to file beyond the July 15 deadline can request a filing extension by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004.
State tax returns
This relief only applied to federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2020, not state tax payments or deposits or payments of any other type of federal tax.
Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines vary and are not always the same as the federal filing deadline.
The IRS urged taxpayers to check with their state tax agencies for those details. More information is available at taxadmin.org/state-tax-agencies.
Postponed deadlines for entities using non-calendar tax years
Some business entities use non-calendar tax years that don't end on Dec. 31. The aforementioned postponement of federal income tax return filing deadlines can apply to them too.
Let's say for example that you own a C corporation that uses an 8/31 tax year-end. The original due date for the corporation's tax year that ended on 8/31/19 was 12/15/19, but you filed an extension request with the IRS to extend the due date to 5/15/20.
Since that date is on or after 4/1 and before 7/15, the filing deadline for your corporation's federal income tax return (Form 1120) is postponed to 7/15. This relief is automatic. You didn't need to file anything with the IRS to take advantage, and your corporation won't owe any penalty if you did.
You can still contribute to your IRA for 2019
Saving into a tax advantaged retirement account does more than provide a nest egg at retirement — it can also reduce your tax bill today. The maximum tax-deductible contribution to an Individual Retirement Account (IRA) for 2019 is $6,000, $7,000 if you are age 50 or older.
You can open an IRA account at any time and still deduct contributions made until July 15, 2020 for your 2019 taxes. The ability to make a tax-deductible contribution to an IRA phase out as your income increases.
You can still fund your health savings account (HSA) for 2019
Taxpayers with high-deductible health plans who are not covered by any other health insurance or enrolled in Medicare may deduct contributions to a health savings account (HSA).
HSA distributions are not taxable if you use them to pay for qualified medical expenses including deductibles and co-payments, over-the-counter drugs, long-term care insurance and health insurance premiums or medical expenses during a time of unemployment.
An HSA provides triple tax savings: Contributions are tax-deductible, earnings on the account are tax-free, and withdrawals for qualified medical expenses are also tax-free. The account goes with you if you change jobs or move, and unused money in the account may be used in future years.
You can still create an SEP-IRA for 2019
You can create and fund an SEP-IRA up to the due date of your tax return (including extensions). The contributions you make to each employee's SEP-IRA each year cannot exceed the lesser of 25% of compensation, or $56,000 for 2019.
Following these suggestions can reduce your tax bill for 2019 and into the future. These concepts are general in nature. Discuss your specific situation with a CPA.
Michael Bosma, CPA, is Principal-in-Charge of the Reno office of CliftonLarsonAllen LLP. His NNBW column, “Covering Your Assets,” focuses on effective planning strategies for every business owner. Reach him for comment at mike.bosma@claconnect.com.
-->The Treasury Department and the Internal Revenue Service provided special tax filing and payment relief to individuals and businesses in response to the COVID-19 outbreak.
The 2019 income tax filing and payment deadlines for all taxpayers who file and pay their Federal income taxes on April 15, 2020, are automatically extended until July 15, 2020.
This relief applied to all individual returns, trusts, and corporations. This relief is automatic, taxpayers did not need to file any additional forms or call the IRS to qualify.
This relief also includes estimated tax payments for tax year 2020 that were due on April 15, 2020.
Since it is mid-June, the filing and payment holiday is now less than 30 days from expiration. Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. You will automatically avoid interest and penalties on the taxes paid by July 15.
Individual taxpayers who need additional time to file beyond the July 15 deadline can request a filing extension by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004.
State tax returns
This relief only applied to federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2020, not state tax payments or deposits or payments of any other type of federal tax.
Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines vary and are not always the same as the federal filing deadline.
The IRS urged taxpayers to check with their state tax agencies for those details. More information is available at taxadmin.org/state-tax-agencies.
Postponed deadlines for entities using non-calendar tax years
Some business entities use non-calendar tax years that don't end on Dec. 31. The aforementioned postponement of federal income tax return filing deadlines can apply to them too.
Let's say for example that you own a C corporation that uses an 8/31 tax year-end. The original due date for the corporation's tax year that ended on 8/31/19 was 12/15/19, but you filed an extension request with the IRS to extend the due date to 5/15/20.
Since that date is on or after 4/1 and before 7/15, the filing deadline for your corporation's federal income tax return (Form 1120) is postponed to 7/15. This relief is automatic. You didn't need to file anything with the IRS to take advantage, and your corporation won't owe any penalty if you did.
You can still contribute to your IRA for 2019
Saving into a tax advantaged retirement account does more than provide a nest egg at retirement — it can also reduce your tax bill today. The maximum tax-deductible contribution to an Individual Retirement Account (IRA) for 2019 is $6,000, $7,000 if you are age 50 or older.
You can open an IRA account at any time and still deduct contributions made until July 15, 2020 for your 2019 taxes. The ability to make a tax-deductible contribution to an IRA phase out as your income increases.
You can still fund your health savings account (HSA) for 2019
Taxpayers with high-deductible health plans who are not covered by any other health insurance or enrolled in Medicare may deduct contributions to a health savings account (HSA).
HSA distributions are not taxable if you use them to pay for qualified medical expenses including deductibles and co-payments, over-the-counter drugs, long-term care insurance and health insurance premiums or medical expenses during a time of unemployment.
An HSA provides triple tax savings: Contributions are tax-deductible, earnings on the account are tax-free, and withdrawals for qualified medical expenses are also tax-free. The account goes with you if you change jobs or move, and unused money in the account may be used in future years.
You can still create an SEP-IRA for 2019
You can create and fund an SEP-IRA up to the due date of your tax return (including extensions). The contributions you make to each employee's SEP-IRA each year cannot exceed the lesser of 25% of compensation, or $56,000 for 2019.
Following these suggestions can reduce your tax bill for 2019 and into the future. These concepts are general in nature. Discuss your specific situation with a CPA.
Michael Bosma, CPA, is Principal-in-Charge of the Reno office of CliftonLarsonAllen LLP. His NNBW column, “Covering Your Assets,” focuses on effective planning strategies for every business owner. Reach him for comment at mike.bosma@claconnect.com.
