A CPA's guide to the new later tax-filing deadline

April 15 has become synonymous with tax-filing day...but not this year. Due to coronavirus concerns, the IRS has decided to give taxpayers until July 15 to safely complete their returns and file them.

The announcement, made on March 20 via Twitter by Treasury Secretary Steven Mnuchin, doesn't have all the blanks filled in yet. But this is what we know so far:

Q: My taxes are already done, and I know that I owe money. I should just wait until July 15 to file and send in my payment then, right?

A: If you have already completed your tax return, you should still send in your return as soon as possible but can delay submitting payment until the new July 15 deadline. 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. It also allows the IRS to review your tax return and agree to your tax liability. In the event you made an erroneous tax deduction, claimed a tax credit you should not have, or made some other arithmetic mistake, you will have more time to prepare in the event the IRS disagrees with the information stated on your return.

Q: What if I expect a refund, on the other hand? Should I file right away?

A: If you expect a refund, filing your tax return sooner is always better, because this puts more money in your pocket sooner. Waiting to file until the deadline provides an interest-free loan to the federal government and limits your ability to have access to your money. In current circumstances, the federal government would want you to file your return immediately in order to claim this refund. Doing so would provide more potential money to circulate in the economy and guard against an impending economic recession.

Q: Could this July 15 filing delay have any impact on me receiving my refund on time?

A: Much like any circumstance where waiting until the last minute could cause a rush and stress available resources, waiting until this new July 15 filing deadline could result in delays for receiving your tax refund. If you believe you will be owed a tax refund and you can prepare your own tax return or use tax software to help you, you are encouraged to do so immediately.

Q: In the past I've heard you should file as early as possible if you're worried about scammers stealing your identity and claiming your refund. Is that still true?

A: Sadly, by delaying the deadline, this could result in greater potential for identity fraud. By allowing scammers more time to file a return and claim a refund on your behalf, the opportunity to defraud you of your refund is greater. As a result, filing as soon as possible is always recommended because even if you owe taxes, you will have until July 15 to submit payment.

In the event you expect a refund, the safest way to file your tax return is by e-filing your 2019 tax return and then opting to have your refund directly deposited into your bank account. This will get you your refund sooner and safer, assuming the provided info is correct. By e-filing, the IRS can process electronic tax returns and refunds much faster than it can handle paper returns and sending checks through the mail.

Q: I may need even more time than July 15. Can I file for an extension? If so, will the extension date be Oct. 15, or will it be even later?

A: At this time, it would appear that an extension to Oct. 15 is available per the IRS website. However, no specific guidance has been given since this announcement about any changes to an extension beyond July 15 to the usual Oct. 15 deadline. As a result, it may remain in place as of this writing, though this situation is rapidly evolving, and it could change at any moment. It might be best to view July 15 as the official deadline and prepare accordingly.

Q: Will the due date for my state tax return be delayed too?

A: In alignment with the decision to defer filing and paying your federal income taxes, many states have issued automatic extensions as well. They have done this in the hope of providing financial relief to Americans during the coronavirus pandemic. You will need to verify whether your state has made such accommodations by checking this list or checking directly with your state's tax agency on their website.

Q: Can I wait until July 15 to make 2019 contributions to my IRA or HSA?

A: At the time of this writing, despite the deferred filing and tax payment deadline, the Treasury has not provided guidance on the deadline extension for making contributions to your health savings account or individual retirement accounts.

Q: Do I still have to make an estimated tax payment for the first quarter of 2020 on April 15?

A: IRS Notice 2020-18 states that all estimated tax payments originally due on April 15 for the 2020 tax year do not need to be submitted until July 15. Further, there will be no penalties and interest assessed on these balances due.

Q: Clearly there are some details left to be worked out. How should I keep on top of things?

A: Watch major media outlets like Kiplinger, directly through the Treasury's Press Releases page, or through the daily media briefings with the president and his staff.

Q: Has pushing back Tax Day like this ever happened before?

A: It would appear no national deferment in the deadline has occurred before. However, large-scale natural disasters have delayed certain geographies from filing on the usual April 15 deadline in the past.

Q: What do CPAs like yourself think about all this?

A: In some sense, I am sure many feel a relief to have more time to prepare tax returns on behalf of their clients. Instead of having the usual three-month window (rough amount of time between when most people receive the necessary documentation in early to mid-February to prepare a return and the tax filing deadline), taxpayers will have almost double the time this year. On the face of the announcement, it seems like a rational decision to delay the tax payment deadline to July 15, because this would keep an estimated $300 billion in the economy.

However, had the April 15 filing deadline remained in place as it originally was, this would have forced people who likely will receive a refund to file and receive their money sooner. By delaying both dates, this grants many the ability to delay paying, but it also removes any urgency for those due a refund to file sooner as well. That money could have been put back into the economy sooner had the April 15 filing deadline remained static.

Q: Do you have any other advice?

A: Despite the added time, if you are due a refund, file as soon as you are able. If you need assistance preparing your return but have fear of straying far from your home, some tax software companies offer live assistance from a tax professional. However, you can also prepare your own return for free through this same software available through the Free File Alliance.

Finally, as communities across the nation and world deal with an unprecedented health pandemic, many cities and regions may feel the painful impact of the temporary closure of businesses, schools and other public facilities and the cancellation of events. At the most extreme, like here in California, many must deal with shelter-in-place orders and quarantines.

Undoubtedly, these actions will go a long way toward flattening the exposure curve and ensuring our health facilities can handle the outbreak in a manageable way. However, this social distancing and resulting economic impact are likely to bring financial uncertainty for many people. People could experience a loss of income and lifestyle due to workplace closures, business hardships, or from the illness itself.

As a result, please try to keep in mind there are a number of actions you can take financially as you plan for the potential impact of the coronavirus on you and your family and friends in the short and long term.

Several measures from the federal government aim to lighten the financial burden on Americans in the form of temporary student loan relief, business continuity funding, voluntary mortgage forbearance in the event of financial hardship, and potentially stimulus checks delivered directly to the members of the American public most harmed by this health emergency.

While my family hopefully escapes this event relatively unscathed from a health perspective, my wife and I are using this event as a time to reassess our financial situation. We are also planning for how our family might continue should something unexpected befall one or both of us now that we have a son.

This includes considering what items and terms we would want memorialized in our wills, reviewing our life insurance needs, reconsidering how we invest money in the stock market or other alternative investments, as well as identifying what items exist in our budget that simply don't improve our happiness or push us toward our life goals.

Much like having more time to prepare your tax return, by working remotely and spending a great deal more time together as a family, we have gained more time to reassess what is most important in our lives. Given the significance of this event many will relate to for years to come, I would recommend considering how you can align your decisions with what makes you happiest. While we don't entirely know where these circumstances will lead, having a sound financial plan can help.

 

This article was written by Riley Adams from Kiplinger and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.