July is here, and that means it’s time to pay your income taxes.
Tax Day is usually April 15. But this year the federal government extended the deadline for paying federal income taxes to July 15, which falls on a Wednesday, due to the coronavirus epidemic.
The Treasury Department and the IRS announced June 29 that they won’t extend the three-month reprieve. Taxpayers can still request a filing extension to Oct. 15, though they’ll still have to pay the IRS by July 15.
Until that date,, federal income tax payments can be paid without penalties and interest, regardless of the amount owed. No additional forms or phone calls to the IRS are needed to qualify for this automatic extension.
After July 15, however, taxpayers who haven’t paid their income taxes will face IRS penalties. An extension to mid-October won’t delay the requirement to pay taxes by July 15; it only extends the deadline to file income tax returns.
In March, the IRS urged taxpayers who are due a refund to file taxes as soon as possible. Most refunds are issued within 21 days, it said.
You Can Still File For An Extension
With only days to go, you may need extra time to file your taxes. You can still file for an extension with the IRS to give you until Oct. 15 to finish your return.
An important point to remember, however, is that an extension doesn’t give you extra time to pay your taxes. It only gives you three more months to file them. An estimate of what you owe is still due by July 15.
And while you’re doing all of this, don’t forget your state income taxes. Many states have moved deadlines into July, but two had their state taxes due in June.
Most states with a personal income tax have extended their April 15 due dates to July 15. Other states with different deadlines for personal income taxes are:
- Iowa: July 31
- Hawaii: July 20
- Idaho: June 15
- Virginia: June 1 for payments
Freelancers Hit Twice On July 15
Freelance workers usually pay estimated quarterly taxes in April, June, September and January.
This year the deadline extension has moved their April 15 and June 15 payments to July 15, 2020. If they didn’t make those payments by the original due dates, they’re due in mid-July.
Not paying quarterly estimated taxes could result in paying a penalty to the IRS for underpayment.
To avoid this, it helps for freelancers to budget and set money aside as they earn it. That’s easier said than done, but automatic withdrawals from a checking account to a savings account set aside for tax payments can make it easier.
The IRS has a tax withholding estimator online to help figure out how much to pay each quarter.
Freelancers may already have a feel for this from past tax years, and can adjust their estimated payments based on income fluctuations throughout the year. Tax filing software can also help them estimate payments.
Ways To Reduce Your Taxable Income
It’s still not too late to take advantage of ways to reduce your taxable income for the 2019 tax year.
The IRA contribution limit in 2019 was $6,000. If you’ve got that much cash on hand and make the contribution to your retirement fund by July 15, be sure to tell your financial institution that the money counts for 2019 and not 2020 contributions.
Deposits to a traditional IRA may be tax deductible, depending on how much you earn and if you have access to a workplace retirement plan.
A health savings account, or HSA, is another place to find some tax relief. An HSA allows people in a high-deductible health plan to use pretax dollars to pay for medical care.
HSA contributions are either pretax or tax-deductible and will lower your taxable income for the year.
Payment Help Is Available
With or without a filing extension to Oct. 15, federal taxes for the 2019 tax year are still due July 15.
Taxpayers affected by the coronavirus still have to pay their balances by July 15, but the IRS has many payment options. They’re available at the IRS website and don’t require contacting an IRS representative.
Payment options include help for people who can’t pay in full, and smaller penalties for some taxpayers. That’s a big help because interest and late-payment penalties will continue to accrue on any unpaid taxes.
Monthly installments can be set up through the IRS website, as can a request to temporarily delay collection until your financial situation improves, and an offer in compromise is available to some people to settle their tax debt for less than the full amount.
The key thing to remember is whatever you do, do it by July 15. The date of April 15 is likely stuck in your head as Tax Day, but in 2020, everything has changed.