[This article was written by Alexis Maness.]
In addition to the many factors of our daily lives that have changed as COVID-19 has swept the globe, taxes are undergoing some modifications as well. With all the news and contradicting reports, it can be difficult to keep track of what to rely on as fact, and what is currently just rumor. As an already complex topic for many individuals, hearing that there are going to be changes to income taxes can be intimidating. However, this guide will lay out these tax updates and how they will affect you, so you can focus your energy on what’s important, taking care of yourself and your loved ones.
Fortunately, the changes that have been made to tax policy are designed to help American taxpayers during these uncertain economic times, easing the burden of dealing with your taxes and minimizing out-of-pocket tax expenses. Let’s dive into some of the major changes to taxes due to COVID-19 and how they might affect you:
#1: Extension for Filing & Paying Your Federal Income Taxes
First things first, your most pressing tax matter is likely figuring out whether you’re expected to file by April 15th. The short answer is no.
Due to the hardship many Americans are experiencing due to COVID-19, from loss of income to falling ill, the IRS has extended the filing and payment deadlines for 2019 federal income taxes. The new filing and payment deadline for your 2019 federal income taxes is Wednesday, July 15th, 2020.
The deadline will be extended automatically, so you don’t have to file any additional paperwork if you intend to file on or by July 15th. Taxpayers can comfortably take advantage of this extension without facing penalties. It is expected that 27% of US adults will take advantage of the extension.
If you need more time to file, beyond the automatic July 15th extension, you will need to file a request for a further extension. Since extensions are typically granted in 90-day intervals, that would extend your filing and payment date to October 15th, 2020.
If you need assistance filing your 2018 or 2019 income taxes, or have specific questions about how coronavirus will impact your tax obligations, a tax expert at Community Tax can review your circumstances and help you ensure you remain in compliance.
#2: Extension for Filing & Paying Your State Income Taxes
Similarly, you can also defer your state income taxes if you need, without penalty. For the majority of states the deadline to file and pay your state income tax return has been extended to July 15th, 2020. However, there are some states, including Iowa, that have extended the date even further.
To find out when your state income taxes need to be filed and paid by, visit your state’s government website.
#3: Filing for US Expats
If you are an American living abroad, your unique tax situation may have you concerned. However, if you fall in this category, you also qualify for the automatic tax payment and filing extension.
#4: Receiving Tax Refunds
The changes in filing deadlines should not affect how long it takes to get your tax refund. The IRS still anticipates that taxpayers should receive their refund within about 21 days if signed up for direct deposit.
#5: Payment of Tax Debts
If you currently owe tax debts such as late penalties and interest fees, the collection of these payments will be suspended until July 16th, 2020. If you still owe tax debt after the extended payment deadline, the IRS will reinstate their collection efforts. Interest and penalties will also begin to accrue once again after this date passes.
#6: Garnishing of Tax Refunds Suspended
If your tax refunds were previously being garnished due to outstanding debts, any action will likely be suspended for now, with one specific exception. If you are behind on child support, your tax refund may still be garnished.
#7: IRS Staffing & Tax Preparation
If you have questions about your taxes, you may have noticed that it is more difficult to get assistance lately. As with virtually every other organization, the IRS has had to significantly reduce their staffing at this time—both for phone assistance and in their physical offices. The same goes for many tax preparers who may have had to reduce staffing, or are taking time off to care for children or their own health.
Luckily, the filing and payment extension should give you more time to address your concerns before you need to take any action. For the most up-to-date information regarding tax policies and changes regarding COVID-19, you can visit the IRS website for ongoing updates.
#8: Economic Impact Payments
As you’ve likely heard, the government will be dispersing economic impact payments (commonly referred to as stimulus checks) to the majority of Americans in April. In fact, it is estimated that about 90% of U.S. households will benefit from this program.
While most individuals will not have to do anything to receive their check, it is important to note that the payment is based on your most recently filed income tax return, either 2018 or 2019. For some groups who don’t typically complete an income tax return, such as certain senior citizens, this may prompt questions and concern. If you do not typically file an income tax return, you will need to file a simple tax return in order to receive your economic impact payment.
You’re likely also wondering, are stimulus checks considered taxable income? According to the IRS, economic impact payments are not taxable. However, if your income drastically increases, bringing you over the threshold by the time you file your 2020 income tax return, you may be responsible for paying back a portion of the stimulus payment you received. That said, this policy will likely affect very few individuals.
Just like the COVID-19 pandemic is ever-evolving, so are the policies that are being put into place in response. This guide is a great overview of the changes that have been made to tax policies based on the development of COVID-19, but be sure to remain abreast of further changes as the situation evolves to ensure that you remain in compliance with your tax obligations and know what to expect when you file. Keeping tabs on how and when to file your taxes will help you avoid unnecessary penalties and make your 2019 filing much less stressful.
Alexis Maness has a Bachelor of Science in Integrated Marketing Communications and is a contributing editor for 365businesstips.com. As a professional content writer, she has over five years of experience and is a contributing writer for several San Diego magazines. Alexis specializes in topics related to business, marketing, finance, and hospitality and tourism.