Tax Deadline For 2020 Pushed Back Amid COVID-19: What This Means For You
On Friday morning, Treasury Secretary Steven Mnuchin announced that the Internal Revenue Service will be extending the deadline to file taxes. This announcement comes after an earlier decision to extend tax payments by 90 days. While American taxpayers would ordinarily be expected to file their 2019 tax returns and make payments by April 15, the deadline has been pushed to July 15.
Amid the chaos and confusion of COVID-19, you may be unsure of what this decision means for you and whether you should delay filing your taxes. We’ll walk you through the reasons and implications behind the tax deferment, so you can decide what’s best for you.
Why Was The Tax Deadline Pushed Back?
The decision to push back the tax deadline has been made to ensure that Americans currently affected by COVID-19 are not penalized. Furthermore, it’s intended to enable Americans to maintain liquidity during a time when many find themselves recently laid off or forced to stay at home in order to reduce the number of COVID-19 cases throughout the country.
By putting off filing and paying taxes, the hope is that individuals will have more money available to pay for housing, health care, groceries and childcare. For small businesses, it’s believed that the reprieve will enable them to stay in business and pay their employees as they wait to see the impact COVID-19 has on future consumerism.
What Does This Decision Mean For You?
Americans who choose to push back their payments will not be penalized, nor will they be charged interest on late payments. However, Mnuchin has urged those who are likely to receive a refund and are able to submit their returns on time to file now. According to the Washington Post, 73.2% of taxpayers received refunds last year, meaning millions of Americans will presumably benefit from filing on time.
Although you have until July 15 to get your returns in order, you should consider your finances. If you received a refund for 2018 and your income did not substantially increase during 2019, it’s recommended that you file as soon as possible. The funds that you receive could be useful in the coming weeks and months, especially if COVID-19 has already impacted your financial well-being.
As of March 13, the IRS has processed over 70 million tax returns and sent out refunds that averaged about $3,000. While they will continue to do so, it’s unclear whether any forthcoming restrictions will limit their ability in the future. Although there’s a chance that Congress will pass a stimulus package that could bring some relief to individuals, there’s still no indication as to when this money will be received nor who will qualify for it. For these reasons, it’s highly encouraged that you don’t wait to file if you don’t have to.
To make the process as fast and safe as possible, the IRS advises taxpayers to utilize e-filing and select direct deposit as their preferred method for receiving refunds. As of now, this method typically leads tax filers to receive payments within 3 weeks. However, be sure to double-check your account details before submitting. Any mistakes made in your filing can greatly increase the time it takes to receive your refund.
What If You Can’t File By The New Deadline?
If you can’t file your taxes in the next 90 days, you can request to defer filing until October 15. This October extension is not new. It’s available to tax filers every year, but it doesn’t extend the deadline for tax payments. Those who choose to defer their filing until October 2020 will have to file an extension form by April 15 and still make their payments by the July deadline. If you can’t make the total payment, there’s the possibility of creating an installment plan.
Why You Shouldn’t Wait To File Your Taxes
Unless you’re likely to owe a lot of money, it’s inadvisable to wait. Remember, while tax payments have been deferred, you’ll still have to pay them eventually, and it may not be as easy to obtain the help of accountants and tax preparation firms in the coming months. Although it’s possible that filing will be pushed back beyond the new deadline, the government will likely decide to charge interest on payments made after July 15.
It’s also crucial to keep in mind that while the deadline for federal taxes has been pushed back, this is not the case for all state taxes. Certain states have agreed to adhere to the July 15 deadline, but you should check to see if your state is among them. If your state has not extended the deadline, it will be easier to file both your federal and state taxes together.
The Bottom Line
The decision to defer tax filings is a vital step in ensuring that Americans have the federal support they need during these unprecedented times. However, just because you can wait until July to file your taxes doesn’t mean you necessarily should. If you’re able to file your taxes and are expecting to receive a tax refund, you should take the time to submit your returns now. The refund you receive may be just what you need to jumpstart that emergency fund. For more tax filing options, read our guide on tax filing software for 2020.
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