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Tax Day, but there's more

A lot has changed since the beginning of 2020. One of those changes just happens to be the date to file your 2019 personal income tax return. Many people have taken advantage of the additional time to file their tax returns which was delayed until July 15, 2020, but it is important to note that this day is more than just the deadline to file your 2019 tax return. It is also the deadline for other tax related filings.

Retirement Contributions: Part of the benefit of the extended deadline was also the extension of making contributions to Roth and Traditional IRA accounts. Since these contributions are always due by the April 15th filing date of your tax return, the added time to file 2019 has given individuals the opportunity to also fund these accounts before July 15, 2020.

Extensions: If you fall into the category of individuals who are unable to file by the July 15, 2020 deadline you will need to file for an extension which will give you until October 15, 2020 to file your returns. Penalties, interest, or additions to tax for failure to pay federal income taxes were disregarded during the April 15th through July 15th extension period window, but these will begin to accrue on July 16, 2020. This means, whatever tax might be due with your return should be paid with your extension. An extension of time to file your tax return is not an extension of time to pay your taxes. For an extension to be valid, a taxpayer must properly estimate their tax liability and pay that amount with their extension Form 4868. This is also true for state filings.

Estimated Tax Payments: Estimated tax payments are typically due April 15th, June 15th, September 15th, and January 15th. For 2020, the IRS extended the due dates for the first two quarterly payment to July 15th. This means taxpayers that are required to pay estimates now have two payments coming due very soon. Taxpayers who fail to pay the safe harbor (minimum) amount due as estimates may be subject to a penalty for underpayment of taxes. The penalty is based on the interest on the underpayment, which is calculated using the short-term federal rate plus three percentage points. The penalty is computed on a quarter-by-quarter basis, so even if you have prepaid the correct amount for the year you may be subject to a penalty if the amounts were not paid proportionally or timely. These penalties can also sometime be avoided by annualizing your income to show which quarter you received your income and that payments were made in proportion to that income. For 2020, the penalties for failure to pay federal income taxes during the period of April 15th through July 15th will be disregarded.

Anticipated Refunds for the 2016 Tax Year: There is a three-year statute of limitations for tax filings. The statute for individual 2016 tax filing normally would have expired April 15, 2020, however this statute was extended to July 15, 2020. If you have not filed a 2016 return, and you expect to receive a refund, you must file your return by this extended date. If the return is not filed you will not have access to a refund after that date, regardless of if you file a return. This applies for both original filings and amended returns. It is important to note that this statute is only for refunds and does not apply to amounts due for unfiled 2016 returns. If you have an unfiled return for 2016, it is in your best interest to file as soon as possible or you are subject to the IRS preparing a return for you which may have a much less favorable outcome.

It has been an interesting first six months of 2020. With all of the changes that have happened, there is a lot to keep up with. Hippo Tax Services is here to help, and answer any questions you may have about your tax filings or other tax related questions. Please see our "information about your taxes button" at the bottom of our home page.

Please check with your Curran Wealth relationship manager,
or contact Curran Wealth Management if you have any questions.
 
 518.391.4200 • info@curranllc.com

The material contained in this article is for educational and informational purposes only.  The information herein is considered to be obtained from reference sources deemed reliable, but no representation or warranty is made as to its accuracy or completeness.  This article is not, and should not be regarded as “investment advice” or construed as a “recommendation” or an offer to buy or sell a security.  The information contained in this article may not apply to your personal circumstances.  Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation.  Information on taxes is based on the tax laws existing at the time of publication.  Tax laws are subject to continual change.  In addition, tax laws vary by state.  This article is not, and should not be regarded as tax or legal advice.  We cannot ensure tax consequences of any transaction.  If you would like a detailed analysis of your tax situation, with specific tax recommendations, you can discuss the possibility of pursuing a formal relationship with Hippo Tax Services, LLC.