Wink Inc.
Enrolled Agents
America’s Tax Experts
®
Wink Tax Services
COVID-19: Tax Season Delayed Until July 15 - Wait
or File Now?
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.
Who Qualifies?
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
The relief does not apply to federal information returns; therefore, if
you have a tax return that is otherwise postponed, and you need to
file an international information return with it, you need to file your
tax return or extend by April 15, 2020, or June 15, 2020 (if outside
the U.S.).
Examples of international information returns affected include the
following:
Form 8938, Statement of Specified Foreign Financial Assets
Form 5471, Information Return of U.S. Persons With Respect to
Certain Foreign Corporations
Form 8858, Information Return of U.S. Persons With Respect to
Foreign Disregarded Entities (FDEs) and Foreign Branches
(FBs)
Tax Payment Deadline
If you qualify for the relief, your federal income tax payment is due
July 15, 2020.
This payment postponement applies only to the following:
2019 income tax return balance-due payments
2020 income tax estimated tax payments that are due April
15, 2020
There is no limit to the deferred amounts. Earlier guidance provided a
$10 million limit for C corporations and a $1 million limit for other
taxpayers, but the IRS eliminated these limits in its updated
guidance.
The relief does not provide for a waiver of 2020 estimated tax
payment penalties for not making the payment on the normal
schedule. But we’d expect the IRS to be generous in granting relief
when the time comes to file your 2020 tax returns.
If you already filed your 2019 tax return and scheduled a direct debit
payment, call the IRS e-file Payment Services 24/7 at 1-888-353-
4537 to cancel your payment at least two business days prior to the
payment date.
Example 1
Sarah, who is single, owes $10,000 on her 2019 Form 1040. She
does not have a 2020 estimated tax payment requirement.
Sarah must:
file or extend her 2019 Form 1040 by July 15, 2020; and
pay the $10,000 balance due for her 2019 Form 1040 by July
15, 2020 (even if she extends to October 15, she has to pay
by July 15, 2020).
Example 2
Jake and Karen’s 2019 Form 1040 shows a refund of $1,500. They
have a 2020 estimated tax payment requirement of $2,000 per
quarter.
Jake and Karen must:
pay $2,000 for their second-quarter estimated tax payment by
June 15, 2020 (yes, June 15—strange but true);
file their 2019 Form 1040 or extend it by July 15, 2020; and
pay $2,000 for their first-quarter estimated tax payment by
July 15, 2020 (yes, the second quarter was due on June 15).
Example 3
Steve and Joan’s 2019 Form 1040 shows an estimated balance due of
$1.1 million. They have a 2020 estimated tax payment requirement
of $100,000 per quarter. Due to missing tax forms, they usually do
not file until September.
Steve and Joan must:
pay $100,000 for their second-quarter estimated tax payment
by June 15, 2020;
file a Form 4868 by July 15, 2020, for their 2019 Form 1040,
to request an extension until October 15, 2020;
pay $100,000 for their first-quarter estimated tax payment by
July 15, 2020; and
pay $1.1 million for their 2019 Form 1040 balance due by July
15, 2020.
Should You Wait?
If your tax return shows a refund, file it as soon as possible—get
your cash as quickly as you can.
If you have the cash and liquidity to make your tax payments on
April 15, 2020, but keeping those payments in your bank account
earns extra interest income, 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.
Be safe and take care.
Sincerely,
Derrick
P.S. Don’t forget, I’m always here to help you in any way I can.
Wink Inc. Enrolled Agents | 2701 Troy Center Dr, Ste 255 |
Troy | Michigan | 48084 | Tel: 248-816-1220 | TF: 800-276-8319
| Text: 248-800-6013 |