2020 Tax Day might feel a bit surreal thanks to the coronavirus pandemic, but the Treasury Department (IRS) applied a deadline extension to taxpayers earlier this year. This automatic extension postponed filing your federal tax return deadline to Wednesday, July 15, giving you a reprieve of three extra months where you can file your tax returns and pay any taxes you owe for 2019. There has been so much that has happened in the last 4 months that we feel it’s important to have a conversation with a Certified Public Account (CPA) or tax professional sooner rather than later. There are advantages and disadvantages in the tax code and it is important to understand them and what strategies you can implement.
Extra Time to File Your Federal Tax Return
These 90 extra days allowed you to take more time filing your federal owed on income from 2019. Depending on what state you live and operate in, you may have had to file your state return already. Every state is different, and it is important to understand your requirements during these unprecedented times. Remember, though, that during this time, the interest and penalties have been waived! With many businesses having to shut down, this postponement was meant to aid those struggling to file their federal tax return. If your business is shutting down due to COVID-19 or any other reasons, it is recommended to contact a CPA or tax professional before doing so.
This federal extension automatically applied to all taxpayers with a filing or payment deadline on or after April 1, 2020, and before July 15, 2020, whether you were an individual, business, trust, or estate. Second-quarter tax estimate deadlines, among others, were also postponed to the July date.
How the U.S. Tax System Works
The way that the U.S. tax system is structured, the IRS necessitates that those employees not having their employer deduct federal income taxes out of their paychecks must make estimated tax payments all through the year. It means that someone who is an independent contractor must estimate how much they will owe in taxes and then submit this payment to the IRS every quarter. Essentially, you are paying your taxes as you go. This may seem like a simple task, but many times this is overlooked and can cost you thousands of dollars.
At Corporate Capital, our accountants and tax preparers have been busy gathering the necessary documents and helping to prep returns for our clients. If you took advantage of the extension to arrange your 2019 return, we are ready to help! For those who still needed to file for an extension, you can postpone sending in documents until October 15 (although you need to pay your taxes by July 15, if you still owe, you will be assessed penalties and interest).
Other tax-related deadlines have also been pushed back to July 15, 2020. It would include your federal and state balances for 2019, as well as your federal and state estimated payments for 2020. Interest and penalties on your tax payments will also start accruing again.
Setting Up a Payment Plan
You should pay as much as you can afford and may even think about signing up for a payment plan. Why? According to the IRS, if you plan on owing more than $1,000 in income taxes for the year, you are required to pay off at least 90% of your current federal tax liability. It comes out to 100% or your federal tax liability on the previous year’s return (whichever is smaller) so that you don’t end up hit with an underpayment penalty.
Your goal should be to pay as much of your balance as you can by the July 15th deadline. Since many states also moved their tax filing and payment deadlines to that date, you might want to pay your state taxes owed in full, and then work with the IRS to pay your federal taxes still owed.
The good news is the IRS does provide very reasonable long- and short-term payment plans. They also charge a lower interest rate than your typical bank does. Other options the IRS gives you include an offer in compromise or where you settle on a payment amount due for less than you originally owed. You can also ask for a postponement until you can make a payment. It does mean extra paperwork will need to be filed and will also need the IRS’s approval.
Enlist Corporate Capital’s Tax Experts
If you need help preparing your 2019 tax return, Corporate Capital is in the business of helping you do just that and is taking new tax clients! We proudly offer our clients tax consulting and preparation through a Certified CPA and accredited IRS tax accountant to make sure your business remains compliant and retains corporate status.
Our Certified Public Accountant will review your tax liability each quarter, monthly profit & loss statements, and consult with you throughout the year to help you lower your tax liability. We help you maximize your tax deduction to make the minimum legal tax payment. We make sure that your federal and state tax returns are in compliance with taxpayer reporting responsibilities and review your previous taxes to find tax-saving opportunities for you! In addition to year-round consulting and research for tax issues that may be affecting your business growth, we also offer professional advice on matters related to your business’s incorporation process. You will receive the latest in tax advisory and accounting support for the state revenue agency and IRS audits.
If you are a Nevada Corporation, Wyoming LLC, or incorporated in any other state, we can help! We assist thousands of clients across the country with filing their 1040 personal tax returns, 1120S (S Corps), 1120 (C Corps), 1065 Partnerships and more. We would love to assist you and your business! Whether you need personal or corporate tax preparation services to file your taxes to make your payments on the July 15 deadline, Corporate Capital is here for you. Call our office at 855-371-0070 today to learn more. We are happy to take the stress out of filing your taxes and are happy to offer a FREE, no-questions-asked consultation!