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The New Tax Deadlines, Explained
On Tuesday, Treasury Secretary Steve Mnuchin announced that the IRS is delaying federal tax payments by 90 days to mid-July, in response to the financial instability caused by the COVID-19 coronavirus pandemic.
Today, Mnuchin moved the filing deadline back to July 15 as well.
During this three-month period, no interest or penalties will be charged. The deferral is automatic for everyone, as Tax Day has been officially postponed to July 15. Corporations will also be able to take advantage of this deferral period if they owe less than $10 million in taxes. According to data from the IRS, about 73% of tax filers received a tax refund last year, so this delay will not necessarily impact those people. But Michele Cagan, CPA, says that “for the more than 25% who end up owing taxes, this will offer temporary financial relief which could help significantly during this crisis.”
The coronavirus pandemic has upended the lives of millions across the world, and people are looking for all the financial support they can get from private companies and the government. The move is expected to benefit freelancers, gig workers, employees and small business owners affected by the downswing in the restaurant, hospitality, and tourism industries, college students, and the unemployed.
How do you know if you’ll get a refund? Cagan explains, “Generally, if someone got a refund last year and their situation hasn’t changed at all, they’ll probably get a refund again this year. Otherwise, the only way to really know is to fill out the tax forms.”
Related: See our picks for the best tax software.
Treasury Secretary Mnuchin recommends that people still file their taxes as early as possible, in order to receive the potential refund that could make up for lost wages.
It’s important to note that this 90-day delay does not apply to state and municipal taxes, so you will still need to file and pay those by April 15, unless your particular state has made emergency provisions for taxpayers. At this time, California, Connecticut, Maryland, North Carolina, South Carolina, Washington and Puerto Rico are among the states and territories that have postponed taxes for affected individuals and businesses. You can find the full updated list through the American Institute of Certified Public Accountants (AICPA).
For those hurting financially right now, Cagan recommends that tax filers, especially freelancers and consultants, “take every possible tax deduction so they get the biggest possible refunds, or reduce their tax bills. A lot of people, especially those with 1099 income, overpay their taxes.”
Additionally, if you receive regular paychecks, you can fill out a new W-4 form to have less taxes taken out. “This could result in a tax bill next year, but will free up much-needed cash now.”
Related: Here’s where to find financial assistance during the coronavirus pandemic.
photos (c) Dennis Drenner 2016