2019 Federal Income Tax Liabilities Due July 15 by Richard Cabrera, JD, LLM, CPA
The July 15, 2020, extended deadlines for filing 2019 federal income tax returns is right around the corner, but there is still ample time for taxpayers to identify their eligibility for new or expanded tax credits and deductions and pay the appropriate amount of taxes due. Taxpayers may request an additional three months to prepare their tax returns via an extension, however the deadline for paying 2019 federal tax liabilities without late payment penalty or interest is July 15.
The IRS postponed several tax deadlines to provide much-needed relief to taxpayers reeling from the effects of the COVID-19 pandemic. In addition to delaying the federal income tax filing and payment deadlines from April 15 to July 15, the IRS also extended to July 15 the dates that individuals, trusts, corporations and other businesses have to make their first and second quarter estimated income tax payments for 2020, which would normally be due on April 15 and June 15, respectively.
Federal Income Tax Returns
If you need until Oct. 15, 2020, to file your 2019 federal income tax return, you must file a request via IRS Form 4868 by July 15 and submit r electronic payment of your estimated 2019 tax liability by that date via direct pay, debit card, credit card, digital wallet or the Electronic Federal Tax Payment System (EFTPS). If you cannot pay the full amount you owe by July 15, you may apply for a payment plan, the specifics of which will depend on your unique tax situation. Penalties and interest on unpaid balances will begin to accrue on July 16.
Regardless of whether you expect a tax refund or a tax liability for 2019, it is recommended that you talk to an advisor sooner than later. Early filing means that you will receive the proceeds of a refund sooner and the benefit of time to budget for any amounts you may owe, however, filing an extension may provide you with additional tax planning opportunities. Moreover, it is important to remember that new July 15 deadline also applies to several tax-efficient planning strategies you may implement to reduce your 2019 tax bill, including making 2019 contributions to your individual retirement account (IRA) and your health savings plan (HSA).
Quarterly Estimated Tax Payments
When making your first- and second-quarter estimated-tax payments for 2020 via check, you should also file IRS Form 1040-ES. Electronic payments may be scheduled up to 30 days in advance of the due date with Direct Pay, or up to 365 days in advance via the EFTPS.
To figure your 2020 estimated tax, you must project your expected adjusted gross income, taxable income, taxes, deductions, and credits for 2020, taking into consideration any changes to your specific circumstances as well as recent modifications to the tax laws under the CARES Act. You can use your 2019 federal tax return as a guide, but you will want to ensure that your estimates are as accurate as possible to avoid underpayment of estimated tax penalties. This will require you to pay the smaller of 90 percent of your current year (2020) tax liabilities, or 100 percent of the tax shown on your prior year (2019) tax return. If you are in higher-income tax brackets, you will need to pay 110 percent of the tax shown on your prior year tax return.
Amended Tax Returns for 2019
If you already filed your federal income tax returns for 2019, you should assess whether or not any of the other forms of relief included in the CARES Act may affect your reporting and related tax liabilities for the year. For example, the new law allows a five-year carryback of net operating losses (NOLs) generated in 2018, 2019 or 2020, an expanded limit of business interest expense deductions, and an opportunity to immediately write off 100 percent of qualified improvement property expenses, all of which can help taxpayers recover taxes they may have already paid in 2019 or prior years. Under these circumstances, you may file an amended individual tax return for 2019 via IRS Form 1040-X.
About the Author: Richard E. Cabrera, JD, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where he provides tax planning, consulting, and mergers and acquisition services to businesses and their owners located in the U.S. and abroad. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via email at info@bpbcpa.com.
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