The Virus, the April 15th Filing Date and Extensions

As of 3/20/20, according to the Treasury Secretary’s tweet (and the Notice 2020-18 which followed), both the filing and payment dates have been moved to July 15, 2020.

How to think about this: July 15 is the new April 15. You don’t have to file until then and you can defer payment until July 15. The details haven’t been made clear yet. The situation is dynamic. It seems that each day, new things get published.

For instance what is not yet clear is if you have to get a new extension if you get to July 15 and you haven’t filed yet. Personally, I would wait until the beginning of April to see if this has been clarified. If it hasn’t been, I would file extensions. Why? Penalties for failure to file are high and getting an extension by April 15 might be the way to avoid them.

In any event an extension to file is not an extension to pay but an extension to file until October 15. Here is an IRS link about extensions:

https://www.irs.gov/forms-pubs/about-form-4868

Further a variety of states are going with the new July 15th deadline. My suspicion is that states like New York could well pick up the same dates. Various newspapers have reported it has but nothing has been published saying it has. Nor have al the details been made clear.

“I don’t have the money to pay; I need to go on extension.”  Many people think that if they don’t file their returns until October 15, they will avoid penalties. This is simply incorrect. Even if you owe money and can’t pay it, file by July 15 so that you will only have penalties and interest on the amounts you owe starting 90 days from April 15.

Please do not file an extension with all zeros on it. One of my clients did that on his own and his extension was refused.

What if you genuinely do not have all your information? Then estimate what you owe and pay that.

When you file your return, you can work out if you paid too much or too little.

Also freelancers have to figure out what your estimates are for the next year. I frequently put the first estimated payment into the extension amount. The reason for this is that if there was an underestimation of what is owed, I might be able to be okay because of that first estimate. I can then carry over the overpaid amount, if there is any, to the next year. I then project new estimateds for the client in the remaining quarters. Is this perfect? No, but with estimations, very little is. You want to get in the ball park and keep your possible interest and penalties as low as possible.

There have been articles saying that no estimates will be due until October 15. It is said that this provision and one about extensions being automatically extended until October 15. Maybe it is. Maybe its not. What is clear is we don’t know what will get into the final bill that would have to be signed by the president. I would wait to see what happens by the first week of April.

These are stressful times, and one of the things that might be put into a low priority place is the filing of taxes. It might be better to get your filing out of the way, if possible, so that the stress of having to file doesn’t add to whatever else is going on.