July 2, 2020 …
We wish you a happy Fourth of July and as we celebrate Independence Day with BBQs, fireworks, family and friends, let’s remember the words of Oliver Wendell Holmes, “One flag, one land, one heart, one hand, One Nation evermore!” Ours is the Best!
– – –
In this week’s email, we go over over how to make your July 15 tax payments as pain-free as possible. Due to COVID-19, the IRS pushed almost all tax payments to July. Now, it’s time to pay Uncle Sam.
WHAT’S DUE COME JULY 15?
- Your 2019 individual tax return balance due,
- Your 2019 calendar-year C corporation balance due, and
- Your estimated Q1 & Q2 Payments
If you haven’t filed your taxes and are unable to make the July 15 deadline, we can help you file an extension. That will give you until October 15 to file your return – but you still have to pay taxes you owe by July 15 to avoid penalties and interest.
PAYMENTS TO THE IRS
We highly recommend you make payments to the IRS electronically. With the IRS mail backlog from COVID-19 shutdown, it could take a long time to get your check processed, or the IRS could misplace the payment.
You have two options to make your tax payment electronically.
We prefer the IRS Direct Pay system more than the EFTPS for making estimated tax payments. IRS Direct also allows you to schedule payments up to one year in advance, so you can pre-schedule all your quarterly estimated tax payments.
If you decide to mail your payments,
- Make your check payable to “United States Treasury” and put your Social Security number and “2019 Form 1040” on the memo line of the check.
- Send your check to the correct IRS address.
- Get your envelope to the post office to ensure that it has a postmark on or before July 15, 2020.
Don’t Overpay your Estimates
In every economic downturn, one thing always rings true: Cash is King! The last thing you want to do is send too much to the IRS in estimated tax payments, while not having enough to meet your own personal needs.
You will avoid an estimated tax payment penalty on your 2020 individual return as long as one of the following occurs:
- You owe less than $1,000 in tax on your 2020 return after subtracting your withholding and credits,
- You paid at a minimum the smaller of 90% of your 2020 total tax or 100% of your 2019 tax.
If you will have both a lower income and lower tax in 2020 compared to 2019, you would overpay if you use 2019 as your estimated tax payment benchmark. In this case, estimate your 2020 tax to avoid overpaying your estimate tax. (If you need help with the estimation, give us a call at (541) 326-0993. We can help).
WHAT IF I CAN’T PAY
Penalties and interest start accruing on July 16, 2020, if you don’t pay your 2019 tax return balance due.
At this point, the IRS has not given any indication whether it will give tax penalty relief for tax year 2020 payments. That relief, if any at all, will come late this year or early next year. If you still have a lot of uncertainty about your 2020 tax liability, consider the following:
- Pay off your 2019 tax return balance,
- Make a lower 2020 estimated tax payment on July 15, 2020, and
- Adjust your remaining 2020 estimated tax payments as you get more certainty about your 2020 tax liability.
You can also apply for a payment plan, click here for the IRS online payment plan guidelines.
One last note, you also have until July 15, 2020 to make contributions into an individual retirement account (IRA) for tax year 2019. There have been some recent changes to IRA contributions:
- Contributions are no longer restricted by age. As of 2020, there is no age limit on making a contribution to either a Traditional IRA or a Roth IRA.
- Non-working spouses may also contribute to an IRA.
- Contribution limits don’t apply to rollover contributions.
If you want to discuss any of the above or have questions, give us a call. As always, we are in your corner. A reminder, in honor of Independence Day, our office will be closed Friday, July 3.
Team Legacy CPA