June 11, 2020
Income tax returns must be filed by July 15 if they were not put on extension. Estimated tax payments for tax year 2020, originally due April 15 and June 15, are also due on July 15.
As explained in a press release issued by the IRS on June 9, the Treasury Department and the Internal Revenue Service are providing special tax filing and payment relief to individuals and businesses due to COVID-19. This relief applies to federal income tax returns and tax payments (including tax on self-employment income) that were due on April 15, 2020.
Self-employed people, including many involved in the sharing economy, need to pay quarterly installments of estimated tax. Similarly, investors, retirees and others often need to make these payments. That's because a substantial portion of their income is not subject to withholding. Other income generally not subject to withholding includes interest, dividends, capital gains, alimony and rental income.
Special rules apply to some groups of taxpayers, such as farmers, fishermen, casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year.
Taxpayers can avoid an underpayment penalty by owing less than $1,000 at tax time or by paying most of their taxes during the year. Generally, for 2020 that means making payments of at least 90% of the tax expected on their 2020 return.
Taxpayers need to pay most of their taxes owed during the year as income is received. There are two ways to do that:
- Withholding from pay, pension or certain government payments such as Social Security.
- Making quarterly estimated tax payments during the year.
Tax Withholding Estimator
If a taxpayer receives salaries and wages, they can avoid having to pay estimated tax by asking their employer to withhold more tax from their earnings. To do this, they would file a new
Form W-4
.
If a taxpayer receives a paycheck, the
Tax Withholding Estimator
can help them make sure they have the right amount of tax withheld from their pay. The Tax Withholding Estimator offers workers, as well as retirees, self-employed individuals and other taxpayers a clear, step-by-step method for effectively checking their withholding to protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year.
How to Pay Estimated Taxes
Assistance
The IRS will post frequently asked questions on
IRS.gov/coronavirus
and will provide updates as soon as they are available. Or call any member of our team to assist you
at (610) 828-1900 (PA) or (732) 341-3893 (NJ)
.
Stay safe,
David Gibbs, CPA, CCIFP, MBA
Partner
McCarthy & Company
Source: IRS Press Release. IRS reminder: Deadline postponed to July 15 for those who pay estimated taxes. June 9, 2020
Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).
