Published on March 24, 2020
As many people are dealing with the impact of COVID-19, one of the financial issues that is on everybody’s mind is taxes. Has the deadline for filing been changed? Do you have to file for an extension? Will you be penalized for filing late?
Named for the Coronavirus disease which started in 2019, COVID-19 is continuing to expand across the United States. The governor of New York has ordered a crackdown on congregating in public and is shutting down the majority of New York City. Across the country, the governor of California has issued a self quarantine order effectively causing everyone to have to stay at home, with schools likely shut down through the rest of the year. The virus and quarantine measures to prevent the spread of it is producing serious financial ramifications.
Originally, the President made it clear that people who were impacted by the disease would be able to get an extension for their tax deadline, but at the time it was presumed that one would have to substantiate the level of impact in order for that to be true, and there wasn’t a lot of clarification.
Now, there is. What changes lie in wait for taxpayers in the midst of self quarantine and a global pandemic that falls during tax season?
Treasury Secretary Tim Mnuchin announced that there would be emergency measures under the Families First Coronavirus Response Act to help those who are affected by COVID-19. He stated the government would help people by providing additional time and allowing individuals to make tax payments without any interest or penalties.
In line with the announcements made by President Trump, the IRS officially announced that it planned to move the national income tax filing date from April 15th to July 15th. This move is meant to provide taxpayers with financial relief during the pandemic given that many businesses are having to close their doors and lay off employees to prevent the spread of the virus. The IRS still urges taxpayers and businesses to file as quickly as possible, especially if they receive a refund, as waiting until midway through this extension could cause significant delays in receiving tax refunds. Currently, the Treasury Department says there is no delay in refunds, and that 9 out of 10 taxpayers should receive their refunds in an average of 21 days from the day they filed a return.
**NOTE: Individual taxpayers who need additional time to file beyond the July 15th deadline must request the filing extension using form 4868 which can be found on Irs.gov. Businesses who need additional time beyond that must file format 7004 on irs.gov.
As of March 2020, filing “on time” now means July 15. Taxpayers do not need to file for this extension, it is being granted automatically.
You still have to consider your state taxes, as these changes only affect federal taxes. Not all states have extended state tax filing for people that have been affected by the disease.
In addition to providing educational resources and up to date news on tax filing changes, companies like TurboTax are recommending the use of TurboTax live, particularly for those people that would normally visit a tax preparer in public but are now unable to because of country wide shutdowns. TurboTax also has quick access to the extension documents if you need to file an official extension after the July 15th deadline, which would give you until October 15th to file a federal tax return.
H&R Block encourages individuals that do their taxes on their own to use the desktop software or the online software. There is also the option for the Tax Pro Go that uses your mobile device to upload tax documents, and then allows a tax professional to prepare the return on your behalf. Alternatively, you can bring your documents to any of the offices, and the tax professionals will call you if they have any questions. Then, the tax professionals send the completed return to taxpayers electronically for final review and approval.
Many of the tax prep services are continuing to conduct business as usual, but with a better emphasis on virtual tax prep access and online communication. They will continue to offer services and access to extension filing paperwork throughout the year, with no interruption to their standard services.
It’s important to understand the government does not charge you a fee to file taxes. If you use a tax preparation service like TurboTax or H&R Block, it’s the company that charges the fee and most of the time the fees are waived for basic tax preparation and get incrementally higher for more advanced tax preparation. In some situations, tax preparation services also charge for the cost for preparing taxes on your behalf the closer you get to the deadline. As of this time, no information from major tax prep companies has been released as to whether or not they will waive or reduce the fees in light of COVID-19 pandemic.