If you haven’t heard, this year’s tax filings just changed due to the coronavirus. Here are some answers to a few common questions you may have:
1. Do I still have to file my taxes on April 15?
While April 15 is usually designated as tax day every year, the coronavirus’ widespread impact has just pushed it back three months to July 15.
The official announcement came on March 20 from Treasury Secretary Steven Mnuchin, and it was probably welcome news for anyone owing taxes. With so many people losing their jobs or seeing reduced income due to COVID-19 closings and quarantines, any postponement in owed payments helps.
2. Should I wait until July 15 to file?
The decision to use the three-month tax filing extension depends on whether or not you owe money to the IRS.
If you owe taxes, finances are tight, and you’re facing income loss due to the coronavirus, using the entire extension to file may be a good idea until you get your financial situation in order.
If you know you will be getting a tax refund, though, filing your taxes sooner could give your bank account a much-needed boost.
According to the IRS, the average tax refund for 2020 is approximately $3,000. If your refund is near that number, you could use the funds to pay your rent, buy food or supplies, and more.
3. Does the filing extension mean that refunds are delayed?
It appears as if refunds are being processed as usual, despite COVID-19. The faster you file, the quicker you’ll get yours so you can put it to good use.
4. Does the IRS extension apply to state income taxes too?
The new extension applies to federal taxes only. State income taxes are another matter, so check to see if any changes to those filing deadlines have occurred.
Since many payments are being postponed across the country for various purposes, you may be in luck when it comes to state taxes. Once again, check before filing yours, but don’t delay so you can avoid any penalties.
5. What should I do if I can’t pay my taxes?
Owing taxes is stressful enough. Compound that with job or income loss due to the coronavirus, and it can become a nightmare.
If you owe taxes and are lacking funds to pay them, file your return anyway. If you don’t, you can incur higher penalties that can make your debt even harder to pay in the long run.
Filing your taxes but not paying them will lead to a penalty of 0.5 percent of your tax debt per month. If you don’t file at all, that penalty increases to a whopping five percent monthly.
Filing on time reduces the penalty and allows you to negotiate a payment plan with the IRS. It’s a much better option than ignoring an issue that won’t go away.