Edward A. Zurndorfer –
As a result of coronavirus pandemic, the IRS and most state revenue and tax departments extended the 2019 income tax filing deadline three months from April 15, 2020 until July 15, 2020.This filing deadline is less than two weeks away. For those employees and annuitants who have not filed their 2019 returns, this column presents some last-minute filing tips. For those employees and annuitants who have already filed their 2019 returns, there are some tax-related tasks they can do that could result in both current and future tax savings.
While preparing one’s income tax return can be a challenge, the job can even be more time-consuming for those individuals whose life situations changed significantly during 2019. Changing life situations include marriage, divorce, job changes or a major illness. There are also the tax law changes which adds more complexity. That is why preparing one’s taxes at the last minute can result in careless errors and omissions. It is therefore important that any individuals who have not started preparing their 2019 returns should start the preparation of their 2019 returns as soon as possible.
What are some of the other implications related to the new filing deadline of July 15, 2020?
The July 15th deadline for filing 2019 federal income tax returns also applies to 2020 federal estimated tax payments that were originally due on April 15, 2020 (first quarter of 2020) and June 15, 2020 (second quarter of 2020). Some states may have a different deadline for filing state estimated tax payments.
July 15th is also the deadline to make 2019 IRA contributions. For 2019, individuals younger than age 50 as of Dec. 31, 2019 can contribute a maximum $6,000 to a traditional IRA (deductible or nondeductible) and/or a Roth IRA. If they contribute to a nondeductible traditional IRA for 2019, they should file IRS Form 8606 (Nondeductible IRAs) with their 2019 income tax return. A deductible traditional IRA contribution will show up as an “adjustment to income” (Schedule 1, Form 1040). A Roth IRA contribution is not reported on one’s income tax return. Those individuals over age 49 as of December 31, 2019 can contribute a maximum $7,000 to a traditional IRA and/or Roth IRA.
For those employees who have already filed their 2019 tax returns, they can still make their 2019 IRA contributions. If they are making a nondeductible traditional IRA contribution, they will have to file Form 8606 by itself. There is no penalty for filing IRS Form 8606 by itself provided the form is filed by the filing deadline of July 15, 2020. If they are making a Roth IRA contribution, no paperwork has to be filed. If they are making a deductible traditional IRA contribution but already filed their 2019 federal income tax return, then they will have to amend their 2019 federal income tax return after July 15 by filing Form 1040X.
One other suggestion for employees who plan to make a 2019 IRA contribution. Anyone making a 2019 IRA contribution before July 15, 2020 should make sure they notify their IRA custodian that the contribution is for 2019 and not for 2020. The deadline for making 2020 IRA contributions is April 15, 2021.
In addition to making 2019 IRA contributions, individuals who have Health Savings Accounts (HSAs) have until the July 15th filing deadline to make their 2019 HSA contribution. Any employee or annuitant HSA contributions are reported as an adjustment to income on IRS Form 1040, Schedule 1.
Some Last-Minute Filing Tips
Congress has resurrected for tax year 2019 several tax benefits that had previously expired. These benefits include: (1) Deducting medical and dental expenses that exceed 7.5 percent of one’s adjusted gross income (AGI). (Previously these expenses had to exceed 10 percent of one’s AGI); (2) treating qualified mortgage insurance premiums paid as home mortgage interest; and (3) qualified principal residence indebtedness that was discharged in 2019 can be excluded from income.
With respect to filing status, most married couples file joint returns. They will in most cases pay less in federal income tax compared to filing as “married filing separate.” However, in some situations filing as married filing separate makes sense. For example, the married filing separate option may enable one spouse to qualify for deductions that he or she might not be eligible for or may be reduced on a married filing joint return.
Filing for an Extension
While the 2019 income tax filing deadline was extended from April 15 to July 15, 2020, those individuals who need more time to file their tax returns beyond July 15 can request an extension to file. But individuals must formally request an extension to file no later than July 15th. Filing an extension gives individuals until Oct. 15, 2020 to file their 2019 federal income tax returns.
But individuals should note that an extension to file is not an extension to pay any taxes due on 2019 returns.
To request an extension to file, individuals must do one of the following:
- File Form 4868 (Application for Automatic Extension of Time To File U.S. Individual Income Tax Return) through their tax professional, tax software, such as Turbo Tax, or using Free File here.
- Submit an electronic payment with Direct Pay ; Electronic Federal Tax Payment System, or by debit, credit card, or digital wallet and select Form 4868 or extension as the payment type.
Paying a Balance Due on a Previously Filed 2019 Federal Income Tax Return
There are individuals who filed their 2019 federal tax returns before the enactment of the CARES Act on March 27, 2020. One of the provisions of the CARES Act was the extension of time for individuals to pay any balance due on a 2019 tax return to July 15, 2020. In particular, individuals who filed their returns before March 27, 2020 and initially elected to have their balance due amounts paid through a bank account debit on the original due date of April 15, 2020, could cancel that request in order to have a later debit of their bank accounts, as late as July 15, 2020.
The IRS requires these individuals to reschedule these withdrawals from bank accounts. The scheduled withdrawals must be made no later than July 15. Any individual who must reschedule a withdrawal for a balance due on the 2019 federal tax return should do so as soon as possible by going here.
Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street – Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.