Dear Clients, Colleagues, and Friends:
The evening of Friday, March 20, the IRS provided even more details and clarification on 2019 tax return filings and payments. As with previous commentary, I have covered the most likely scenarios that my clients will face, but please reach out with any questions regarding specific concerns not noted below. This is likely the last of my communications regarding 2019 tax deadlines as I do not expect the IRS to provide further meaningful pronouncements on this topic in the near future, and it’s now a question of addressing states and, at some point, 2020 concerns.
I continue to triage communications and tax filings. At this point, the April 15, 2020 deadline is largely irrelevant to many of my clients. However, I am working diligently to file all returns by April 15 for those who still wish to do so because…normalcy, refunds, and budgeting. Do not hesitate to reach out with any questions or concerns about your particular situation. I may not be as quick to respond as usual, but I am here and happy to help.
Federal legislation is in the works to boost up small businesses, provide cash flow to individuals, and prop up other components of the US economy. An in-depth discussion of this bill, is currently beyond me. If you want accurate coverage from knowledgeable sources, particularly once the final version becomes law, I advise following the Tax Foundation, Tony Nitti, Kelly Erb, and Michael Kitces.
Q1: Has the IRS changed the April 15, 2020 tax deadline for tax filings and/or tax payments? Yes to both. In the evening of Friday, March 20, the IRS released Notice 2020-18 granting an automatic extension of time to pay federal income taxes due April 15, 2020 to July 15, 2020, as well as file federal tax returns due April 15, 2020 to July 15, 2020. Further, the liability thresholds in place under Notice 2020-17 were removed; there is no cap on the amount you can owe and still receive an extension of time to pay and file.
Q2: Will I owe late penalties or interest if I don’t file and/or pay my 2019 federal taxes due April 15 until July 15, 2020? No. (For clarity, this question and answer relates only to taxpayers with December 31, 2019 year ends, such as individuals.)
Q3: What happens if I don’t file for an extension by April 15 and ultimately file my tax return after July 15? Has the extension due date now become July 15, 2020 or will I owe late filing/payment penalties/interest? Currently unclear. To avoid potential unfavorable interpretation by the IRS, if you are my client and your 2019 tax return isn’t filed by April 15, I will be submitting a federal extension for you in the event that your 2019 tax return is ultimately filed after July 15. If this is clarified before April 15, I will adjust my strategy accordingly.
Q4: My tax return and/or tax payment is due May 15, June 15, etc. Has there been any discussion of pushing out deadlines that land after April 15? Not yet.
Q5: Does pushing out the April 15 deadline also mean I have until July 15 to make 2019 HSA and/or traditional/Roth IRA contributions? Unclear. Smart tax people are debating this. I am currently advising that such contributions be made by April 15.
Q6: I did not make estimated tax payments for 2019. Will I still owe underestimated tax penalties? Yes. These have not been waived.
Q7: Do I have to make a 2020 2nd quarter estimated tax payment by June 15, 2020? As of this writing, yes. Which could result in situations where 2nd quarter estimated tax payments could be due before 1st quarter estimated tax payments. I would expect IRS guidance on this, but not anytime soon.
Q8: I file tax returns in one or more states. How is my state addressing April 15 filings and payments? Every state is different. Some have already announced filing and payment delays. Others may or may not issue timely guidance. If you are a client, we will determine together how to approach outstanding state filings and payments. Note that most states either automatically extend tax returns unfiled by April 15 or accept a federal extension as a state extension. To be clear, this applies to filings and not payments.
Q9: Alicyn – why are you a few days behind major news outlets in sharing this information? Because my goal is to provide you with complete and meaningful information from reputable sources so that you can make optimal decisions in a quickly changing environment as opposed to news media who are chiefly concerned with generating advertising revenue. What I lack in speed, I make up for in accuracy. As I’ve said before, be careful what you read online that does not come directly from the IRS and/or state taxing authorities. Public promises, social media posts, and news articles are not authoritative guidance.
Q10: This is all very confusing. Wouldn’t it have made more sense for all tax returns due between March 15 and October 15 to be given a blanket extension of both time-to-pay and time-to-file until October 15 without any paperwork or exclusions? And then request that states follow suit? Don’t folks have enough problems right now already? My thoughts exactly.
Q11: And what’s the deal with a stimulus package based on 2018 tax filings? If the government thought taxpayers needed money, why not give it to everyone now and then have repayments incorporated into 2020 tax returns? What about people who could use the money now, despite having a good year (at least on paper) two years ago? Don’t get me started.
Q12: I’m confused, frustrated, scared and you know a lot about my financial situation. Can we talk? You bet. Email me some good days and times so we can speak soon. Also, breathe.