Finally, there’s a little bit of good news when it comes to the coronavirus and its effect on our finances: The IRS is giving taxpayers a 90-day reprieve. You now have until July 15 to both file your 2019 federal income tax return and pay any federal taxes you owe.
On March 18, the IRS had already issued changes that allowed individuals and C corporations to defer their 2019 federal income tax payments until July 15. Penalties and interest would also be waived on the deferred tax payments until July 15. On March 20, Treasury Secretary Steven Mnuchin then announced that the due date for filing 2019 federal income tax returns would also be pushed to that day.
Here’s what else you need to know about the coronavirus tax extension.
THE EXTENSION WON’T AFFECT REFUNDS
Remember, this latest news only impacts people who owe. “Most Americans actually get refunds; the IRS has said they are still processing returns as usual,” says Patrick Horning, senior director of advanced planning at Northwestern Mutual. In fact, the IRS says more than 52 million people have received refunds to date this year, with the average refund so far just over $3,000.
STATES MAY HAVE DIFFERENT DEADLINES
The tax filing and payment extension only applies to federal income taxes — your state will still set its own deadlines. Check The American Institute of Certified Public Accountants website to see what your state is doing.
YOU CAN STILL FILE FOR AN EXTENSION
If you don’t think you’ll be ready to file your tax returns by July 15, you should still be able to file for an extension to October 15. But as in other years, an extension to file is not the same as an extension to pay. You’ll still have to pay your estimated taxes by the same deadline as everyone else, July 15.
The official IRS notice also allowed taxpayers who make estimated quarterly payments to defer the April 15 payment until July 15. No other official guidance has been given on how other quarterly deadlines could change.
YOU HAVE MORE TIME TO CONTRIBUTE TO YOUR IRA
The deadline for making 2019 IRA contributions was also extended from April 15 to July 15.
TAX BILLS ARE BEING DELAYED, NOT CANCELLED
If you owe taxes, it may be tempting to want to take advantage of the extension. And in some cases, such as if you’re a small business owner whose cash flow has been impacted because of the coronavirus, it may provide some temporary relief. “But even then, it’s just a deferral — you’re not avoiding taxation,” Horning says. “I think the emphasis here is you still have to pay those taxes. So if you're not financially impacted right now, you have to decide whether it’s really worth it to defer that payment.” Have a conversation with your tax advisor to discuss if this makes sense for you.
This article is not intended as legal or tax advice. Northwestern Mutual and its financial representatives do not give legal or tax advice. Taxpayers should seek advice regarding their particular circumstances from an independent legal, accounting or tax adviser.