Taxpayers have until July 15, 2020 to file their 2019 tax returns without incurring a late filing penalty for late remittance. In addition, they have until July 15 to pay any 2019 income tax balance due the IRS without incurring an interest assessment and a late payment penalty.
All good news?
Not necessarily so.
If you are self-employed, in addition to paying any remaining balance of your 2019 taxes by July 15, you also are required to file your first quarter 2020 and second quarter 2020 estimated tax payments by July 15. That is three payment requirements falling on the same day!
Mistake #1: If you are thinking that you can wait until July 15 to address your 2019 taxes, that can be a very costly mistake! Why? The balance due can be significantly greater than you anticipated meaning that you will not be able to pay your 2019 taxes in full. If you are currently in an installment agreement with the IRS, you have violated the terms of that agreement which will require that corrective action be taken. If you were in an Offer-in-Compromise agreement and are within the first five years of that agreement, that OIC is now null and void and the forgiven taxes, interest and penalties of your OIC are now due.
Mistake #2: To avoid the underpayment of tax penalty for tax year 2020, the safe harbors for avoiding that penalty will be based on your 2019 tax liability. After paying the 2019 balance due, will you have sufficient funds to pay your 1Q and 2Q 2020 estimated tax payments? Your delaying everything until July 15 could lead to you becoming non-compliant in the 2020 tax year.
Tax Planning Tip #1
Finish the preparation of your 2019 tax returns ASAP. You then have two options.
Option #1: If you prefer to wait until the due date (July 15) to file your 2019 tax returns, you can do so. (Perhaps this is course of action is desirable because you wanted your Economic Stimulus Payment based on your 2018 tax return). You will now know how much you owe the IRS for 2019 and how much your 2020 1Q and 2Q estimated payments will be. That will give you abut 45 days to plan how you will manage your cash resources to pay your 2019 taxes and 2020 estimated tax payments.
Option #2: When your 2019 tax return is completed, file it. Filing as early as possible is one of the IRS recommendations to minimize ID theft. When you file a tax return before the due date, you are not required to remit payment with that return. You can file the return, and remit payment by the due date (July 15).
Tax Planning Tip #2
If you have always filed your taxes by check, consider using one of the IRS online payment services. Find the one that best suits your needs. I personally like the IRS’s Electronic Fund Tax Payment System (EFTPS) program. The EFTPS program allows you to schedule payments in advance and within certain limitations to alter those payment amounts and due dates if needed. Thus, you can file your 2019 tax return today, and also schedule your 2019 and 2020 tax payments to be made on July 15, 2020.
For real estate professionals with IRS tax debt issues or tax planning issues, feel free to contact me at (610) 594-2601 or by email at info@keysolutions.us.
Bryan Haarlander, an Enrolled Agent and a Certified Tax Resolution Specialist, is an affiliate member of the Suburban West Realtors® Association, a member of the American Society of Tax Problem Solvers (ASTPS), PA Society of Tax & Accounting Professionals (PSTAP), the National Society of Accountants (NSA) and the National Association of Tax Professionals (NATP). He is the author of “How to Resolve Your IRS Tax Debt Problems” as well as a book on how to start your own business. He has been practicing in Exton for 19 years.
His blogs http://www.taxexpertblog.com and http://www.stopmytaxproblems.com discuss pertinent tax and business issues.
By visiting our website you can learn about the 5 Secrets the IRS Doesn’t Share and order a FREE SPECIAL REPORT: Should You Represent Yourself or Hire a Tax Professional.
Keystone Financial Solutions, Inc. specializes in providing innovative tax planning, tax preparation, and solving IRS tax debt problems. The company’s web site is https://www.keysolutions.us and its telephone number is (610) 594-2601.
If you have any IRS tax debt issues or tax planning issues, feel free to contact me at (610) 594-2601 or by email at info@keysolutions.us.
Disclaimer: Content in this blog is for educational purposes only and should not be considered as the rendering of tax, legal or investment advice. The publisher of this blog makes no representations as to the accuracy or completeness of any information herein, will not be liable for any errors or omissions, and shall not assume liability for any losses, injuries, or damages from the display or use of this information. Should you wish to engage our firm to represent you, please call us at (610) 594-2601.
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