Due to the stress that the novel coronavirus, or COVID-19, is putting on the economic system and society at large, the federal government is giving Americans an extra 90 days to work on their taxes. That means everyone has until July 15 to prepare, file and pay their taxes. This means you can technically heave a sigh of relief and put off thinking about taxes for a few months, but hopefully you won’t procrastinate too long.
So if you’re confused and have questions, here are some answers.
Do I have until July 15 to prepare my taxes? Yes. Originally, the federal government was going to give taxpayers until July 15 to pay taxes with interest and penalties, but you still had to file by April 15. That is no longer the case. Now you can wait until July 15 to file and pay your taxes.
But do keep in mind that Treasury Secretary Steven Mnuchin, at a news conference on March 17, observed that many people will be better off if they prepare their taxes in the next month.
“We encourage those Americans who can file their taxes to continue to file their taxes on April 15,” Mnuchin said. “Because for many Americans, you will get tax refunds.”
I doubt I can file my taxes even by July 15. What should I do? File a six-month extension, which gives you until Oct. 15, an option taxpayers have every year. Still, every year, if you file your tax return on Oct. 15, you were still supposed to have paid the taxes you owe. The new July 15 deadline helps taxpayers who owe money. Unfortunately, it doesn’t really help people who procrastinate on filing taxes.
What about my state taxes? You’ll want to stay up to date on your state news. Some states, such as California and Maryland, have extended their tax return filing deadlines. For instance, California’s tax filing deadline is now June 15, and Maryland’s is July 15. Experts assume that many more states likely will tweak their own filing deadlines, especially now that the federal government has made its move.
Is there an argument that the delay should not have happened, since we can all file electronically and avoid going to a tax preparer? Yes, but that’s a difficult question. On one hand, most people file their taxes electronically. According to the Internal Revenue Service, in 2019 for tax year 2018, 88.72% of taxpayers used the IRS’s e-file.
Filing electronically isn’t just a fast way to file – these days, it also means you can file without getting near somebody who has the coronavirus.
But there were good reasons to extend the April 15 deadline to July 15. Gary DuBoff is a principal in the tax and accounting department at MBAF, an accounting and advisory firm with locations throughout the country. He says some taxpayers on the lower end of the financial spectrum would have been hurt by not having more time.
“Not everyone has computers, and not everyone can access their records when needed, which is an argument to extend the deadline,” says DuBoff, who is in New York City.
“Accountants and tax preparers may also be directly impacted, which could cause delays.”
Not only that, there are many free programs, notably Volunteer Income Tax Assistance and Tax Counseling for the Elderly. Those are usually held at community centers, libraries and schools, many of which are now closed due to trying to halt the spread of the coronavirus.
The delay will definitely help taxpayers, according to DuBoff. He says some clients are concerned about the coronavirus hurting their finances and taxes, “especially with regard to the volatility of the market and how this will impact their ability to pay taxes.”
Is it possible that July 15 won’t be long enough of a delay? It is possible. Paul Miller, who owns Miller & Company LLP, a certified public accounting firm in New York City, suggests that it may not be long enough.
“Clients have been calling nonstop asking for financial therapy,” Miller says. “The most common questions are what to do with their employees and what options are available.”
That includes what type of financial help the government will be offering, Miller explains.
“The government is not providing clarity. For example, New York City is offering a $75,000 interest-free loan. You go on the website and submit the application, but there is no guidance when they will get the money and what the terms are. Most important is there is no clarity at a lot of levels. All of these issues are evolving,” Miller says.
Of course, with any luck, that clarity will have evolved long before July 15. Miller paints an unflattering portrait of what he is already seeing: “Clients with restaurants are forced to close. Doctors and medical professionals are receiving a myriad of patient cancellations. Landlords cannot collect rents due to tenants not getting paid.”
Still, Miller says there’s no question that giving taxpayers until July 15 to file and pay owed taxes is a better and more welcome situation than asking taxpayers to file and pay on April 15.
“It will definitely help,” Miller says, “but it is unclear if three months is enough time to recover from the financial losses that are about to be incurred.”