Taxes in July?
As I prepare to write about filing taxes on a hot, humid day, I can’t help but think about the old TV commercial for a local electronics retailer (Crazy Eddie) that touted its “Christmas in August Sale”. It just seems wrong, but for millions of Americans, the early summer weeks will include preparing and paying taxes. Because of the pandemic’s timing and impact, the IRS delayed the tax-filing and payment deadlines from April 15th to July 15th and also shifted quarterly estimates, which would have been due on June 15th, to July 15th.
This postponement may have provided some relief in response to the pandemic, but it is also confusing. A list of forms due July 15 is on the IRS Coronavirus Tax Relief: Filing and Payment Deadlines page, but in general, if you owe a 2019 income tax liability, as well as estimated tax for 2020, you must make two separate payments on or by July 15, 2020: One for your 2019 tax that is due and one for your 2020 estimated tax payments. Thankfully, you can combine the two estimated tax payments into a single payment.
The agency also made July 15th the date by which you have to fund a Traditional or Roth IRA. If you had not made a contribution when you filed your taxes earlier in the year, but now may have the cash on hand to do so, you should take advantage of the extended time horizon. Remember to file an amended return (Form 1040-X) if you are taking a deduction for a Traditional IRA, you don’t need to do anything if you are making a Roth contribution. IRA and retirement expert Ed Slott recommends making a notation on your contribution check (physical or electronic) to make sure that the IRA custodian knows that the contribution is for tax year 2019.
If you are starting the tax filing process, remember that any taxpayer earning $69,000 or less can use the I.R.S’ Free File program, where you can choose among one of the free commercial software products available. The agency also offers Free File Fillable Forms for anyone, regardless of income.
One of the great lessons of the pandemic and the economic lockdown is that everyone should be filing taxes electronically. Not only does this make sense in terms of social distancing, but it also speeds up the processing of returns, refunds and payments. The fastest way for taxpayers to get their refund is to have it electronically deposited into their bank or other financial account. For those who are waiting for a refund after filing a paper return, the check is in the mail, according to the IRS.
If you owe Uncle Sam money, the agency recommends electronic payment options. The IRS Direct Pay allows taxpayers to pay online directly from a checking or savings account for free, and to schedule payments up to 365 days in advance. The easiest way to pay all your federal taxes is through the Electronic Federal Tax Payment System (EFTPS), which is a free system offered by the U.S. Department of Treasury to pay your federal taxes. If you choose to pay with a credit card, debit card or digital wallet option, there will be a fee that goes to a payment processor.
As always, if you can’t get your act together for the July 15th deadline, then file an extension with Form 4868. Doing so will give you until October 15th to file, though you still need to estimate your tax liability and pay any amount due, so you can avoid possible penalties.
A word about those Economic Impact Payments as some of you have asked about government payments that you received for a deceased individual. According to a report from the Government Accountability Office (GAO), Treasury sent $1.4 billion worth of stimulus checks to more than one million dead Americans. Oops!
The IRS has just released guidance in its FAQs about repayments, but the gist is that you need to return the payment to the appropriate IRS location. If the money was deposited or the check was cashed, you will need to make a check or money order payable to U.S. Treasury and write 2020 EIP, and the taxpayer identification number, Social Security number or individual taxpayer identification number of the person whose name is on the check.