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How COVID-19 is Spreading to Your Taxes

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Published on March 24, 2020

What you need to know in order to file your taxes on time during COVID-19.

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?

**Read more about how COVID-19 is impacting flight and hotel reservations, banks and financial policies, and more here.**

COVID-19

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?

Emergency Measures to Help Those Affected

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.

  • According to the IRS, “Taxpayers can also 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 all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax.”
  • This extension is automatic; you do not have to take action to receive it.
  • Taxpayers who are currently suffering financially will have a 90-day postponement on tax payments that apply to 2019 income taxes, as well as first quarter tax payments for estimated 2020 taxes that originally would have been due by April 15th. “Any person with a Federal income tax payment or a Federal income tax return due April 15, 2020, is affected by the COVID-19 emergency for purposes of the relief.”

IRS Offering Extensions

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.

What to be aware of…

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.

How Tax Prep Companies are Helping

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.

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