Tax Time Is Finally Here
From Lee Sherbakoff,
The Nalls Sherbakoff Group, LLC.
Due to the Covid-19 pandemic, businesses were forced to close, and jobs were lost. So, the federal government extended tax season to give taxpayers a break, moving Tax Day to July 15. Taxes can be confusing, and more so now with the unprecedented changes. Let us look at four key topics related to the 2020 tax extensions affecting your 2019 return and perhaps your 2020 return.
- The new deadline
We are halfway through 2020, and many of us have no idea where we are on our 2019 taxes. If this is you, there are a couple of important dates to mark on your calendar that you do not want to miss.
The first is July 15, the deadline to file your 2019 individual tax return. Time is ticking on this, so if you have not already begun the process, now is the time to do so. For those seeking a filing extension, October 15 is another important date to note.
- How to request a valid extension
If you need time to file beyond July 15, you must use IRS Form 4868 to request a valid extension of filing time with the IRS. If this form is submitted in good order and on time, you will receive an “automatic extension of time to file U.S. individual income tax return.” This extension form needs to be postmarked on or before July 15. In addition to filing the extension on time, you need to correctly estimate and pay the 2019 tax due. With a valid extension, the new filing deadline for individuals is October 15.
- The due date for paying taxes
It’s important to note that an extension of time to file is not an extension of time to pay.
The IRS waived penalties and interest during the additional extension time period of April 15 to July 15. However, this waiver of penalty period ends July 15. This means if you owe the IRS, you need to pay by July 15 to avoid any additional penalties and interest. Even with a valid October 15 filing extension, the balance on your 2019 taxes is due July 15.
Now is a good time to review your tax liability, not only based on your numbers as of December 31, 2019, but also based on all the tax law changes in the CARES Act that are retroactive to 2019.
- Estimated taxes for 2020
All the new tax law changes and the extension of time to file can make getting your 2020 income tax planning and filing a bit burdensome. Remember your 2019 tax liability also drives the amount of estimated tax you may need to pay for 2020. It is important to not only look at where you are for 2019, but to use that information to get you on track for 2020.
The IRS also extended the deadlines for estimated income tax payments for the 1st and 2nd quarters of 2020 to July 15. So, on July 15, in addition to paying any taxes due for 2019, you may have to pay estimated taxes for the first two quarters of 2020.
Please reach out to your tax professional to discuss your particular situation for 2019 and 2020 taxes.
Stay safe and stay well.
The Nalls Sherbakoff Group, LLC
DISCLOSURES: The information provided in this letter is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy or investment product, and should not be construed as investment, legal, or tax advice. The Nalls Sherbakoff Group, LLC makes no warranties with regard to the information or results obtained by third parties and its use and disclaim any liability arising out of, or reliance on the information. These indexes reflect investments for a limited period of time and do not reflect performance in different economic or market cycles and are not intended to reflect the actual outcomes of any client of The Nalls Sherbakoff Group, LLC. Past performance does not guarantee future results.