The coronavirus pandemic has much of life into a kind of stasis. When Treasury Secretary Mnuchin announced an extension of the deadline to file 2019 tax returns, it may have felt like tax season was going into a temporary freeze along with sporting events, social gatherings, schools, and (for many) work outside the home.
Even though the filing deadline has been pushed back to July 15, taxpayers who are able to focus on wrapping up their 2019 taxes should still aim to get their returns filed soon. These are uncertain times. With conditions changing by the hour, the safest choice is to put last year’s taxes safely in the rearview mirror.
The team at Ferguson Timar is continuing to serve clients through these challenging times. Here are some of the ideas we’ve been thinking about during this very strange tax season.
- Will refunds be delayed by the coronavirus crisis?
Getting ahold of your tax refund check may be especially important for your personal finances this year. The IRS has not changed its pre-pandemic projection that it will pay most refunds within 21 days of receipt of electronic filings. Delays are normal for paper filers, people who want to receive their refunds as paper checks, and filers who claim certain credits flagged by the IRS as having high fraud risk. Let’s hope the pandemic does not impact the ability of the IRS to continue to process returns.
- There’s extra time to pay.
The July 15 extension applies to payments as well as filings. This is true for several kinds of tax, including estimated quarterly income taxes for businesses and individuals. Note that it does not apply to payroll taxes. If you end up owing money to the IRS for 2019 or for the first quarter of 2020, the extension offers an extra few months to get the cash together.
Some businesses with payroll tax concerns may be able to seek relief under the coronavirus stimulus package passed into law on March 27. Qualified businesses may be able to retain certain payroll taxes, rather than paying them to the IRS.
- IRA contribution deadlines have been extended, but beware!
When the Treasury Department extended the tax filing deadline they also extended the deadline for people to contribute to their retirement accounts. The contribution limit for a traditional or Roth IRA is $6,000 for people under the age of 50, or $7,000 for those over 50. Although taxpayers now have until July 15 to make their contributions, those who are in a financial position to contribute before April 15 should do so. Taxpayers don’t want to be caught in the middle if financial institutions fail to retool their systems to allow contributions after April 15 to count toward an individual’s 2019 limits.
- How do 2019 returns influence eligibility for a stimulus check?
The stimulus package passed into law on March 27 includes direct payments to qualified individuals. Adults are eligible to receive up to $1,200 each, with an additional $500 for every qualifying child who is 16 years old or younger. Eligibility for the payments is based on income. Single adults with adjusted gross incomes of $75,000 or less, or married couples who file jointly and earn $150,000 or less, will receive the full amount. Those earning more than these limits will receive less, with individuals earning $99,000 or more or couples earning $198,000 or more receiving nothing.
There are a few important things to know about the stimulus checks:
- They will not be taxable income. However, if your 2020 income exceeds the eligibility limits you may be required to return the affected portion of the payment with your 2020 tax payment.
- Eligibility will be based on the taxpayer’s 2019 return or, if one hasn’t been filed yet, the 2018 return.
- If your previous income makes you ineligible for the benefit, but your 2020 income will make you eligible, you may be able to receive it as a tax credit when you file your 2020 taxes.
- If your bank account information or mailing address has changed since you last filed your taxes, you will need to update the IRS with your current information. The IRS has indicated that it is working on creating a web-based portal to allow taxpayers to provide updated information.
Have state tax deadlines been extended?
Most states have extended their deadlines to match the IRS deadline of July 15. Taxpayers should double check their state’s rules before assuming that they need not file on April 15. Some states have only extended certain types of filings while leaving deadlines for others in place.
The California Franchise Tax Board has extended deadlines to July 15 for most types of filing, including personal, partnership, LLC, and corporate filings.
Ferguson Timar is here for you.
Ferguson Timar continues to serve clients during these challenging times. We’re here to answer your questions, help you prepare your 2019 returns, and begin planning for the future. To make an appointment with one of our advisors, call (714) 204-0100 or reach out through our contact page.