Edward A. Zurndorfer
Tax Deadline Extended
On March 20, 2020, the IRS announced in IRS Notice 2020-18 that the due date for filing 2019 federal tax returns has been extended to July 15, 2020. Earlier on March 13, 2020, the IRS announced that individuals having a balance due on 2019 tax returns would have until July 15, 2020 to pay the balance due without interest and penalty, and individuals could delay without penalty the payment of the first 2020 federal estimated tax payment due April 15, 2020. With these announcements (made as a result of the coronavirus situation in the US and abroad), individuals now have until July 15, 2020 to file their 2019 federal income tax returns and to pay any balance due without penalties and interest, regardless of the amount of federal income taxes owed.
Individuals need not file any additional forms or call the IRS in order to receive this automatic three-month federal tax filing and payment extension. But if any individual has a need for an extension beyond July 15, 2020, to file his or her 2019 federal income tax return, then the individual will need to follow the usual protocol to get an extension until Oct. 15, 2020, to file his or her 2019 returns. This protocol for a tax deadline includes filing IRS Form 4868 (Application for Automatic Extension of Time To File U.S. Individual Income Tax Return) and paying any federal income tax that that will be due when the 2019 federal income tax return is filed. The three-month filing and payment extension apply to all 2019 individual tax filings including those filings using Form 1040 and Form 1040-SR.
Although not formally announced by the IRS (but is most probably true), the deadline for making 2019 IRA (traditional and/or Roth IRA) contributions and Health Savings Account (HSA) contributions (until the March 20 announcement – April 15, 2020) has also been extended three months to July 15, 2020. Presumably, this is the case whether or not an individual has filed his or her 2019 federal income tax returns.
States with state and local income taxes and having their own tax filing deadlines of April 15, 2020 (or close to that date) are expected to follow the federal filing and payment extensions. Like the federal extension, the states’ filing and payment extension applies to all individual tax filings including individual tax returns and estimated tax payments.
Some Consequences to Individuals of the 2019 Filing and Payment Extension to July 15
Obviously, the filing and payment extension is a relief for many individuals, especially for those individuals who may not have the funds available at this difficult time to pay any balance due on 2019 tax returns and/or to make 2020 estimated tax payments. But there are several consequences of these extensions that affected individuals should consider before delaying the filing of their 2019 tax returns and/or making their estimated tax payments. Some of the most important consequences are:
1. If an individual is ready to file and expects a refund on the 2019 federal return, then he or she should file as soon as possible and not delay. The IRS is trying to pay federal tax refunds within 21 days of electronically filed returns. Until a tax return is filed, no refund can be issued.
2. If an individual has a balance due on the federal tax return but is expecting a refund on his or her state return, then delaying the filing of the federal return means delaying the filing of the state return. Because a state tax return piggybacks on the federal tax return, the state tax return cannot be filed if the federal return is not filed. Delaying the filing of the state return means delaying a state tax refund
3. While federal and state estimated tax payments due April 15, 2020 can be made as late as July 15, 2020, the payments should be paid as close to April 15, 2020 as possible. This is because the second estimated tax payments are due June 15, 2020 (there has been no announcement by the IRS whether the June 15, 2020 estimated tax payment deadline will be extended). Moreover, all four estimated payments for 2020 (due April 15, June 15 and September 15, 2020 and January 15, 2021) should be paid. In case one or two payments are missed, an individual who is required to make these payments may be subject to an under-withholding penalty for 2020 when the individual files his or her 2020 income tax return in spring 2021.
4. If an individual is due a refund from a previous year federal income tax return – either a return that was originally filed and subsequently amended or a return that was never filed – then the individual has until the earlier of two years from the time the amended return was filed or three years from the date the tax due on the tax return was considered paid (April 15 of the year following the year being filed) to file for the refund. This means, for example, that any individual who did not file an original federal income tax return for tax year 2016 (due date was April 15, 2017) and expects a federal income tax refund has until April 15, 2020 (three years from the original due date) to file in order to receive the refund. Any individual who needs to either or to amend his or her 2016 federal income tax return and expects a refund has until April 15, 2020 to file an amended return. In either situation, if the individual does not file, then the refund will be permanently lost. The Treasury Department and IRS do not have the authority to extend the statute of limitations for the deadline filing for federal tax refunds of past year returns, even in the current situation of the coronavirus.
Edward A. Zurndorfer is a Certified Financial Planner, 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 the employees of Serving Those Who Serve 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.