Since the release of Notice 2020-18 extending the traditional April 15th tax day to July 15th, several questions have surfaced and today the Internal Revenue Service provided much needed clarification.
HSA and IRA contributions for 2019 can be made until July 15th
Tax planning for the 2019 tax year is mostly over but two moves can still be done: HSA and IRA contributions. These two can be made for the 2019 tax year up until the traditional April 15th filing due date. With the IRS moving tax day, now these contributions can also be made up until July 15th, 2020 as well.
Contributions to a Health Savings Account (HSA) can be up to $3,500 for individual coverage or $7,000 for family and provide not only a current reduction in taxable income but tax-deferred growth and tax-free withdrawal for medical expenses. While the annual contribution may seem small, these accounts are highly valuable as there is no income limitation for contributing and there is no "use it or lose it" annual requirement as with other medical savings accounts.
Traditional and Roth Individual Retirement Account (IRA) contributions for 2019 max out at $6,000 per taxpayer, or $7,000 for those age 50 and up. Depending on your income level and type of account, a current tax deduction can be taken or the contribution may be part of a future tax-free withdrawal. SEP IRAs also follow suit with the July 15th, 2020 due date, however, SEP contributions can be made as far out as the extended October 15th deadline if one is requested.
Additional extension requests are due July 15th
If your return would have been originally due on April 15th but now is due July 15th and you still need more time to file, an extension request can be made on Form 4868 for individuals and Form 7004 for C corporations by July 15th, 2020.
Filing for this additional extension will extend your due date until October 15th, 2020. Reminder that this is an extension of time to file the return but not an additional extension of time to pay any tax due. Make sure to estimate and pay in by July 15th any tax that will be due with the return once filed.
Fiscal year filers with extended due date of April 15th, 2020 get three more months
If your fiscal year return ends in 2019 and your extended due date falls on April 15th, 2020 – you just apparently got a three month additional extension! A surprise to some but welcome relief for those facing the upcoming due date. A word of caution, however, IRS FAQs are not authoritative and this may conflict with information in Notice 2020-18. The FAQ does state the IRS is considering issuing additional guidance around the answers provided in their FAQ.
2020 second quarter estimates are still due June 15th
The IRS requires tax to be paid in throughout the year. Employees see this happen in their paycheck withholding but self-employed folks are required to make estimated tax payments quarterly, or potentially face a penalty come tax time.
Strangely enough, even though 2020 first quarter estimated income tax payments are now due July 15th, 2020, second quarter estimates are still due June 15th, 2020! Plan for June but be on the lookout for this one to potentially change, as tax advocacy groups continue to push for more relief.
Check out our updated FAQ to see the full picture and as always, stay tuned because times they are a changing - fast! We'll keep you up to date.