Here it is again, the end – the final filing deadline for 2020 – for most people. TaxMama® wants to give you some last-minute tips.
It’s October again. The filing deadline for individuals (1040) and C corporations (1120) that got extensions in April must file by Thursday, October 15th. (You do realize that your partnerships, S corps and 1041s were due last month, right?)
Well, first of all, the good news – in the face of bad news. Those people in the various disaster zones still have more time to file – and pay a variety of taxes. (This includes personal, business and payroll forms and taxes that are due.)
This year, the President did declare the California wildfires as disaster zones. So if you’re affected, your new deadline is extended to Dec. 15. (Note: none of the wildfires in 2019 were declared by the President at all – and so none of the 2019 damage is deductible on the IRS return – but is deductible on the California return.) https://www.irs.gov/newsroom/around-the-nation-california
Victims of Hurricane Sally have until January 15, 2021 to file tax returns and make payments. https://www.irs.gov/newsroom/irs-announces-tax-relief-for-hurricane-sally-victims
Several other areas were affected by disasters this year. And have extended deadlines to December 15, 2020 or later. Click on 2020 to get the most current list.
Here is the main IRS disaster page, with links to each state. See if your area is affected – and any special deadlines that might apply – https://www.irs.gov/newsroom/around-the-nation
Moving on from natural disasters to financial and personal disasters
What about if you’re still trying to prepare your tax return and you don’t have any of the natural disaster excuses, perhaps you have COVID19 excuses because you’re not getting data you need. And/or you are frustrated and annoyed due to missing information and new tax law confusion?
If your problem is based on COVID19 missing information, it’s quite possible that if you wait until you get all the information, and then file your tax return, that the IRS (and state) will waive your penalties. But why go through the process of begging for penalty relief?
Here’s a better idea. (Always a great solution!)
Even if you’re missing information, don’t understand Sec 199A, or other parts of the Tax Cuts and Jobs Act. Do the best you can to estimate, project, or compute the missing or confusing information as best you can. If you’re really not sure about the numbers – tell the IRS. And tell them why. Include a Form 8275 disclosure statement and identify each line in the tax return that you estimated. Include a worksheet, spreadsheet or explanation for each item – and explain why you had to estimate the amounts. Do the best you can with this. Remember, you always have three years to amend the tax return once you get better information.
The benefit of doing this? The main benefit is to avoid the 25% late filing penalty that will kick in almost immediately after October 15th. You won’t have to try to correspond with the IRS, or sit on hold for hours, to try to get the penalties waived. The other benefit is, you get it done and reduce your stress. You now have time to get help to fix any shortcomings in your return.
Some business owners (especially those with no employees) still have time to reduce their balance due by opening and funding a SEP-IRA until October 15th, if you don’t already have one open (or fund your solo-401(k) if it’s already open by December 31, 2019.) Be SURE your financial institution sets it up properly and on time. Be absolutely certain to get the funds in and designated as 2019 contributions if you want to claim the deduction on your 2019 tax return. (Of course, if you have employees, make sure they are covered and funded as well – so this strategy may not be as easy for employers.)
If you have a balance due, try to pay it in full. Though your interest on that balance is only about 3% – 4% per year, the late payment penalty is ½ % per month. That runs from April 15th.
Remember to make your estimated tax payments for 2020 – they were due by September 15th – but if you pay a little late, the penalties are minor.
And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion
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