The timing is inconvenient, not to mention that it doesn’t feel right. Summer is supposed to be a time for vacations, travel and picnics. A time for barbecues and family reunions. Instead, we’re coming upon a misplaced annual reunion -Tax day! The United States Treasury changed the April 15, 2020 filing deadline to July 15, 2020. Which means you only have a few days to get ready! Pay attention to the following:
FEDERAL PAYMENT DEADLINE
If on July 15, 2020 or before, you have prepared your personal/individual tax return for tax period 2019 and you have determined you have a tax liability (you owe); you must submit your payment on July 15, 2020 if possible.
FEDERAL FILING DEADLINE EXTENSION
If for some reason you cannot file your 2019 federal income tax return by July 15, 2020 file an extension using IRS Form 4868 by July 15, 2020. Your extension must be postmarked or filed electronically by July 15, 2020. The extension will provide you with additional time to file your return by October 15, 2020.
FAILURE TO FILE and FAILURE TO PAY
I could spend the next few weeks explaining IRC (Internal Revenue Code) Section 6651, but that would be too exciting. Therefore, I’m giving you “the skinny” on it. If you can’t file by July 15, 2020 file an extension for….sake! If you owe and don’t have the money to pay, file your tax return anyway for….sake! Why? There are two penalties the IRS will assess if you fail to act. One penalty is for the failure to file and the other is for the failure to pay. If the deadline comes and you fail to file your return, or an extension (IRS Form 4868) and you owe you will be assessed a penalty of 5% up to 25% of the liability (the amount you owe). Yikes! Additionally, if you owe, don’t have the money, and fail to file your prepared or completed return, you will be assessed a failure to pay penalty of 5% up to 25% of your tax liability. Yes! that’s right! Between the failure to file your return or an extension and the failure to pay, you could wind up increasing your potential tax liability by an additional 10- 45% due to interest and penalties.
Most states if not all, have adopted the federal deadline for filing income tax returns. This means your state tax return is also due on July 15, 2020. If you are unable to file on time, file a state extension.
TAX CREDIT AND DEDUCTIONS
Many people in their haste to meet the tax deadline, leave money on the table. They fail to use or take advantage of all of the tax deductions or credits for which they qualify. Tax deductions reduce your income, while tax credits reduce your tax liability and are dollar for dollar. You want to take advantage of every credit for which you qualify.
Many people will report income received from an employer (a W-2), retirement (1099R), or from social security administration. However, they may not report all income received as an independent contractor. Be sure to report all income received whether or not you received IRS Form 1099 from the company or person who hired you. The penalty for under reporting your income could increase your liability by 25%.
BUSINESS USE OF HOME
You may be able to deduct expenses related to the business use of part of your house if you meet the requirements. Some of the requirements would include using part of your home exclusively and regularly, using it for your trade or business and it being your principal place of business. An example of exclusive use would be you as an accountant use your den as your home office to prepare tax returns and client’s financial statements. However, your family also uses the den for recreation. The den is not used exclusively for trade or business and you cannot claim the use of the den for home office business deductions.
Get moving before it’s too late!