“During the three-month postponement, taxpayers won’t be subject to interest or penalties for filing after April 15,” says Mitchell Drossman, National Director of Wealth Planning Strategies for the Chief Investment Office of Merrill and Bank of America Private Bank.
Here are answers for some key questions you may have about the extension and your personal taxes, according to the Chief Investment Office of Merrill and Bank of America Private Bank. As always, it’s best to consult your tax advisor for guidance on what the tax extension might mean for you.
Who qualifies for the postponement?
The relief applies to any taxpayer with income tax returns and payments usually due on April 15. That includes individuals, trusts, estates, partnerships, associations, companies and corporations. There are no limitations on the amount of tax that may be postponed, and taxpayers do not need to make a formal request in order to take advantage of the postponement.
What tax filings and payments are or aren’t covered?
The provision applies to all 2019 federal income taxes. Self-employed people may also postpone filing and paying their estimated quarterly taxes for the first quarter of 2020, normally due on April 15, until July 15. But self-employed taxpayers should keep in mind that their estimates and payments for the second quarter will still be due on the usual date of June 15. And note that filings and payments for gift taxes are not postponed.
Does this mean more time to contribute to a tax-advantaged retirement plan or HSA?
Yes, at its coronavirus site the IRS states that the deadlines for 2019 contributions to IRAs, company-based retirement accounts and health savings accounts will all be extended from April 15 to July 15.
Are state and local taxes postponed as well?
“States generally follow the federal due dates, but it is best to check with your individual state,” Drossman says. For example, while California has extended its filing and payment deadline to July 15, Massachusetts suggests that residents use existing provisions to request extensions. Other states have yet to announce extension plans.
Can taxpayers file for an automatic extension beyond the July 15 deadline?
Tax payers have traditionally been able to request a 6-month tax extension by filing the proper paperwork by April 15—a move that’s particularly useful for filers whose taxes are complex. However, they’ve still been required to pay their taxes by April 15. Under this year’s tax postponement, the deadline for requesting this 6-month extension is now July 15. Taxes are still owed on July 15, 2020, and the filing deadline becomes Oct. 15.
Is there any reason not to take advantage of the federal extension?
If you believe you have a refund coming this year, filing your return on April 15 rather than taking the postponement could mean you receive your check sooner. Whatever your situation, it’s important to speak with your tax advisor before making any decisions.
For More Information visit the coronavirus site at irs.gov.