In the wake of the coronavirus pandemic, President Trump and Treasury Secretary Mnunchin have elected to extend the tax filing deadline from April 15 to July 15, providing taxpayers an additional 90 days to prepare and file their tax returns for the 2019 tax year.
The news comes as little surprise in light of the countless actions announced in recent days about measures meant to soften the economic blow of the COVID-19 virus. The argument goes that this will provide an estimated $300b of additional liquidity in the economy and guard against further economic turmoil.
The announcement, made on March 20 via Twitter by Treasury Secretary Steven Mnuchin, doesn’t have all the blanks filled in yet.
At @realDonaldTrump’s direction, we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.
— Steven Mnuchin (@stevenmnuchin1) March 20, 2020
However, many questions can be answered through the IRS notices released so far as well as information provided to the public on the Treasury’s website. Let’s review some of the more pertinent questions likely to be asked as a result of this major announcement.
What If I Have Already Completed My Tax Return?
In the event you have already completed your tax return, you would be better served to submit it now. Doing so does not result in your immediate need to pay any taxes due. Rather, the tax extension now allows you to file any time between now and July 15 while also having that same amount of time to pay taxes you owe. By filing your completed 1040 earlier, you will have more time to make and plan for the potential financial moves necessary to arrange your payment.
Further, filing as soon as you can will permit the IRS to review your tax return and agree on your tax liability. Should you claim a tax deduction you should not have or made some other mistake, you will have more time to prepare if the IRS disagrees with the information stated on your return.
What if I Expect a Refund?
If you expect a refund, filing as soon as you can is always better because this puts your money in your pocket sooner. In fact, Steve Mnunchin encourages those who expect a refund to file sooner than later. This will put money back into the economy faster to fend off an economic slowdown seen across the country.
I encourage all taxpayers who may have tax refunds to file now to get your money. — Steven Mnuchin (@stevenmnuchin1) March 20, 2020
What if I Need More Time than July 15?
Per the IRS website, tax extensions are still available by filing Form 4868 or 7002 to go beyond July 15 to the usual October 15 extension deadline. However, with the rapidly-evolving nature of this coronavirus event, this could change at any moment.
As a result, consider taking a conservative view and assuming it may make sense to view the July 15 deadline as final. In this event, you can consider purchasing the best tax software. For your convenience, we have conducted reviews of the most popular programs on the market below.
|Free version offered?||Simple Tax Returns Only||Simple Tax Returns Only||Simple Tax Returns Only||Simple Tax Returns Only||Simple Tax Returns Only|
|Other Pricing Options (1)||TurboTax:|
(+$39.95/state for Deluxe+;
$49.95 for Self-Employed+)
|Deluxe: $39.95 (2)
Premium: $49.95 (2)
(+$28.95 for unlimited state returns)
|Import Return into Tax Software?||Yes; may import PDF of return from previous software||Allow for a W-2 photo import; can import previous year’s return information from H&R Block on all non-free versions||Yes, may import last year’s tax information or third-party software information. May import PDF files of IRS forms from TurboTax and H&R Block||May upload PDF of previous year’s return;|
pulls in data automatically if used TaxSlayer previous year
|Service & Support||24/7 live support||Phone and live chat; in-person assistance at branch network||Email or phone||Email or phone, FAQs, video tutorials, definitions of key terms|
|Audit Assistance||Provides basic audit support for all returns and personalized audit assessment with Premier||Peace of Mind®, In-person audit support||Audit Defense services||Audit protection included in Premium and Ultimate plans||None displayed|
(2) Discounted prices shown at time of review were $29.95, and $39.95, respectively.
Will State Tax Return Deadlines Be Extended As Well?
Many states have elected to defer filing and payment deadlines as well. To see if your state has done so, review this list to see the states which have issued automatic extensions. If this information does not appear up to date, consider verifying your state’s tax return status by checking directly with your state’s tax agency on their websites.
Are the IRA and HSA Contribution Deadlines Extended to July 15?
At the time of this writing the Treasury has not provided guidance on the deadline extension for making contributions to your health savings account or individual retirement accounts. They have, however, said money from your HSA and high deductible health plan can be used toward coronavirus ailments.
What about Estimated Tax Payments for the April 15, 2020 Quarter (2020 tax year)?
In the most recent IRS Notice (as of the time of this writing: IRS Notice 2020-18), it states all estimated tax payments originally due on April 15 for the 2020 tax year do not need to be submitted until July 15. Additionally, for paying later, you will not face penalties and interest on these balances due.
What Else is Congress Doing to Help American Taxpayers?
Congress has set out on an ambitious mission to counteract the harmful impact of the coronavirus by exploring multiple stimulus measures. While still evolving at the time of this writing, several competing measures before Congress aim to alleviate pain felt by American taxpayers through various means.
Most call for direct stimulus measures in the form of checks mailed to American taxpayers, while other also include paid sick leave for those who don’t have it available through their employer, as well as student loan relief and mortgage forbearance for those facing financial hardship.
The full extent of this will not be known for some time, but to head off the economic turmoil likely to be caused, Congress has been proactive in recent days to pass legislation the country needs to avoid a recession or worse economic situation.
What Should I Do if I’m Self-Employed or Own My Own Business?
In the event you have been impacted by the coronavirus’ economic effects, numerous programs exist to aid you. In an open letter to President Trump, the National Restaurant Association estimated that the restaurant industry alone would lose $225 billion over the next three months as a result of the impact felt by the COVID-19 pandemic. They calculate this will lead to the loss of five to seven million jobs with many other industries suffering alongside.
Travel, airlines, hotels and other discretionary industries have been hit hardest by this health scare. Congress wants to buffer against this challenging economic environment through multiple measures meant to help the economy immediately.
Familiarize yourself with these available programs and make sure you have your financial statements in order should you be required to provide documentation supporting your claims.
What Other Steps Should I Take?
In light of the global impact of this unprecedented health pandemic, many areas have begun to feel the economic pain of the businesses temporarily closing their doors, schools shuttering and other public facilities limiting accessibility as well as the cancellation of countless events. As the public begins to appreciate the seriousness of this pandemic, places like California and other major metro areas have issued orders for citizens to shelter-in-place or even self-quarantine.
These rational decisions will considerably assist the public flatten the curve of COVID-19 cases as well as ensure our health facilities can handle the anticipated uptick in case load. Without a doubt, this enforced social distancing will result in economic pain for many people, causing financial uncertainty. As a result, countless people in several industries could experience a loss of income due to the virus.
When considering the immediate financial impact of the virus, I would suggest keeping in mind you still have a variety of financial actions you can take to plan for the potential impact of the coronavirus in the short and long-term.
As outlined briefly above, the federal government has begun work on taking actions meant to address the present or coming financial burden on Americans. While my family continues to take actions to prevent us from being affected from a health point of view, we have decided to use this event as an impetus for reassessing our financial situation. Further, we have looked at how we might act should something unexpected occur, impacting not only ourselves, but our son as well.
Specifically, we have begun to formalize which details we would want addressed and memorialized in our wills, review our life insurance coverage and needs, reconsider how we invest money in the stock market or other alternative investments, and finally identifying which items exist in our budget that do not improve our happiness or push us toward our life goals.
In conclusion, we see the tax deadline extension as a vehicle to address more financial circumstances and decisions as a whole. Despite the cabin fever beginning to set in from working remotely and remaining indoors, we look at this as an opportunity to reassess what is most important in our lives.
As such, the significance of this event will stand clear in the minds of many for many years to come. When my family looks back, we will hopefully see this as a time we took a challenging situation and turned it positive by aligning our decisions with what makes us happiest. I hope you can do the same.