Published on 06/22/2020
U.S President Donald Trump announced the deferral of the deadline for filing tax returns. As a more significant part of the package to endure the economic blow to the country, the U.S Federal Government gave a 90-day extension to taxpayers for filing their dues.
Since March 12, a lot of new changes were made and new guidelines for filing income tax till July 15, 2020, were introduced. The Internal Revenue Service (IRS) laid out exhaustive details of the extension and what-to-dos.
With the ‘Tax Day’ deadline soon approaching, taxpaying individuals across the country are in jitters. We tell you the five essential things to keep in mind before doing the needful.
What needs to be paid by July 15
Almost all American states decided to push the deadline for filing income tax returns to July 15 instead of June 15. The extension also includes the estimated tax payments to be made for the same financial year. The deadline applies to both resident Americans and those living abroad.
U.S citizens were given a three-month grace period for deferred tax payments. As per the IRS guidelines, the period would not accrue any penalties or interest.
However, some states did not move the deadline for filing taxes for the financial year 2019-20. Residents of states like Virginia had to pay their dues on time.
Applying for an extension for tax payments
If you cannot get your affairs in order by July 15, you can apply for an extension with the Federal Government. Those applying for an extension will be given a window between July 15 and October 15 to file their income tax returns.
To file for an extension, you will be required to fill Form 4868. If you need extensions beyond October 15, you will have to fill Form 7004 in stipulated time.
Taxpayers should note that even if you file for an extension, you will have to pay the unpaid balances and clear your miscellaneous dues.
Penalties and interest fee for the extension period
However, the period after July 15 to October 15 will accrue a penalty of 0.5%-1% of the amount owed to the IRS. An additional interest fee may also be charged. The penalties and interest charges apply to all individuals who fail to file their taxes by July 15. The penalties charged are irrespective of the fact if they have registered for an extension or not.
Penalty charges may be waived off for persons who file for an extension and have not defaulted estimated tax payments in the year 2019.
Tax deduction contributions are still possible
The IRS is allowing you to make contributions till July 15 to apply for tax deductions before filing your income tax returns. You can even put money into your Individual Retirement Accounts (IRA) and Health Savings Accounts (HSA). Since the contributions to both these funds can be made until the tax deadline approaches, you have ample time to work out these contributions.
The IRA contribution limit has been set to $6,000 for people below the age of 50. The same for people above the age of 50 has been set to $7,500. The limit for HAS has been set to $3,500 for individuals and $7,000 for a family.
File for a refund immediately, if eligible
Secretary of Treasury Steve Mnuchin said that the IRS was working 24×7 to make sure that all refunds were being processed as soon as possible. If you’re an individual who is eligible for a tax refund, you should speed up the process and prefer an electronic mode to file for the same. It is easy, hassle-free and faster.
The economic crisis looming over the U.S may be far from over but aware citizens can the advantage of new policies rolled out to help overcome the crisis. The IRS, Treasury and the Federal Government are spearheading many such initiatives. For better assistance, connect with us at C19Grants@mytaxfiler.com.