DEADLINES AND PAYMENTS:
In the end of March 2020, the IRS announced that the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020. The IRS has also said Taxpayers can defer federal income tax payments due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed. This deferment applies to individual taxpayers and many other types of filers.
In the IRS announcement, they mention this would also apply for estimated taxes due on April 15, 2020 (normally 1st quarter 2020 payments for calendar year taxpayers), which has also been extended until July 15th. Keep in mind that 2nd quarter 2020 estimated taxes (for calendar year taxpayers) are due June 15th, 2020 and this deadline has not been extended by the IRS announcement. For taxpayers who cannot file their 2019 individual income tax return (Form 1040) by the extended due date of July 15th, 2020, they should ensure they file the necessary extension Form 4868 and include payment on or before July 15th 2020 to minimize penalties and interest.
ECONOMIC IMPACT PAYMENTS:
Recently, we have had many inquiries from clients who are eager to receive their Economic Impact Payments and the IRS says the payment will begin in the next three weeks (early April 2020). Many taxpayers will not need to do anything if their U.S. bank account is already linked and taxpayers have received direct deposit in the past. This may also be relevant for taxpayers who are currently receiving social security payments as the payment may be directly paid to the same social security account explains the treasury. Keep updated as the IRS says they will develop a web-based portal for individuals to provide their banking information to the IRS online.
The following is directly from the IRS’s website on Who is eligible for the economic impact payment?
Tax filers with adjusted gross income (AGI) up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive the full payment. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible. Social Security recipients and railroad retirees who are otherwise not required to file a tax return are also eligible and will not be required to file a return.
Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples and up to $500 for each qualifying child.
We know many taxpayers who are claiming the foreign earned income exclusion living overseas and there is no clear guidance yet if the AGI limitation is before or after taking into account the foreign earned income exclusion, but this news will be shared as soon as more guidance is published. The IRS has also not made it entirely clear if they will be using 2018 returns or will be using the 2019 return to determine eligibility (if it has already been filed).
IRA CONTRIBUTION DEADLINE
The deadline to contribute to an IRA is normally the same as the deadline to file your tax return: April 15. Because the due date for filing Federal income tax returns has been extended to July 15, the deadline for making contributions to your IRA for 2019 is also extended to July 15, 2020. Please make sure you tell the plan sponsor which year the contribution is for (2019 or 2020).
SECTION 965 INSTALLMENT PAYMENT
The relief applies to section 965 installment payments due on April 15, 2020. For any taxpayer whose Federal income tax return filing due date has been postponed from April 15 to July 15, 2020, the due date of that taxpayer’s section 965 installment payment has also been postponed to July 15, 2020.
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We will continue to do our best keeping clients updated and the IRS will post all key information on their website here: IRS.gov/coronavirus.
We have been in touch with the IRS in recent weeks and know that the IRS has reduced staff and many employees are working from home, so calling the IRS may not be very effective during the current situation.
The above is for general and informational purposes only and should not be used as legal or other tax advice. Please consult your own professional CPA or lawyer for clarification.