As you know, the COVID-19 pandemic has shut down much activity in the United States. The IRS decided to use its authority in a national emergency to postpone certain tax return filings and payments. This change affects every one of you, and the rules are tricky—after all, this is tax law.
We’ll explain who gets relief; what the IRS postponed; and perhaps more important, what wasn’t postponed. We’ll also tell you whether you should file regardless of the postponement.
First, to qualify for postponement, you must have a tax return that is due on April 15, 2020. In general, the returns due on April 15 include the following:
• An individual filing a Form 1040 series return
• A trust or estate filing Form 1041
• A partnership filing Form 1065
• A corporation filing a Form 1120 series return
In its FAQ, the IRS did not include the Form 1065 for partnerships or the Form 1120S for S corporations when it listed the forms available for relief.
That’s because most partnerships and S corporations have calendar-year returns, making the 2019 tax return due March 15, 2020. But if you have a fiscal-year partnership or S corporation with a due date of April 15, 2020, it should qualify for relief under the official guidance.
Second, you must have one of the following due on April 15, 2020:
• Tax year 2019 federal income tax return
• Tax year 2019 federal income tax payment
• Tax year 2020 federal estimated income tax payment
This grant of relief does not apply to
• federal payroll taxes, including federal tax deposits, and
• federal information returns.
Federal Tax Return Filing Deadline
If you qualify for relief, your 2019 federal income tax return is now due July 15, 2020. You do not have to file an extension on Form 4868 or Form 7004 or contact the IRS to get the automatic postponement to July 15, 2020.
If you need additional time beyond July 15, 2020, to file your tax return, you can file Form 4868 or Form 7004 on or before July 15, 2020, and get an automatic extension to your normal extension due date:
• September 30 for Form 1041
• October 15 for Forms 1040 and 1120
IRA, HSA, and Retirement Plan Payments
The COVID-19 grant of relief also postpones the following payment deadlines until July 15, 2020:
• 2019 individual retirement account (IRA) contribution
• 2019 health savings account (HSA) contribution
• 2019 employer qualified retirement plan contributions
Should You Wait?
If your tax return shows a refund, file it as soon as possible—get your cash as quickly as you can. Even if you have the cash and liquidity to make your tax payments on April 15, 2020, don’t do it. Keeping those payments in your bank account earns extra interest income, and we see no reason you shouldn’t delay until July 15, 2020.
If you have problems with making timely estimated tax payments, we recommend you keep the normal schedule as long as you have the liquidity and cash to make the payments. We don’t want you to fall into bad habits and possibly create an unpayable balance due on your 2020 tax return.
If you are a business owner that needs assistance navigating the CARES Act, click HERE to schedule a consultation.