July 15 Tax Deadline Approaching

The tax filing and payment deadline of
July 15 will not be postponed.

The Department of the Treasury and IRS announced the tax filing and payment deadline of July 15 will not be postponed. Individual taxpayers unable to meet the July 15 due date can request an automatic extension of time to file until October 15, 2020.

Due to COVID-19, the original filing deadline and tax payment due date for 2019 was postponed from April 15 to July 15.

If you file the Form 1040 series returns and you wish to obtain the automatic extension to October 15, 2020, you must file Form 4868 by July 15 to obtain the automatic extension. The extension provides additional time to file the tax return – it is not an extension to pay any taxes due.

If you owe taxes, even if you have a filing extension, you should carefully review your situation and pay what you can by July 15 to avoid penalties and interest. If you are facing hardships, including those caused as a result of COVID-19, and cannot pay in full, several options are available to help.

To avoid interest and penalties, you are encouraged to pay what you can and consider a variety of payment options available for the remaining balance, such as:

Automatic Extension of Time to File

If you need more time to prepare and file your federal tax return, you can apply for an extension of time to file until October 15, 2020. To get an extension, you must estimate your tax liability on Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) and pay any amount due.

Save a Step: Get an Extension When You Make a Payment

You can also get an extension by paying all or part of your tax due and indicate that the payment is for an extension. This can be done using Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or a credit or debit card. When getting an extension by making a payment, you do not have to file a separate extension form and will receive a confirmation number for your records.

State Deadlines May Differ

You should also check your state filing and payment deadlines, which may differ from the Federal July 15 deadline. A list of state tax division websites is available through the Federation of Tax Administrators.

Payment Options

If you owe taxes, you can choose from the following payment options:

IRS Direct Pay allows payment directly from a checking or savings account. This service is free.
Electronic Federal Tax Payment System, or EFTPS. Pay by phone or online. This service is free.
Debit or credit card payment. This service is free, but the processing company may charge a fee. Fees vary by company.
Check or money order made payable to the United States Treasury (or U.S. Treasury) through the mail.

Those who are unable to pay their taxes in full should act as quickly as possible. Tax bills can quickly accumulate more interest and penalties the longer they sit.

Though interest and late-payment penalties continue to accrue on any unpaid taxes after July 15, the failure to pay tax penalty rate is cut in half while an installment agreement is in effect. The usual penalty rate of 0.5% per month is reduced to 0.25%. For the calendar quarter beginning July 1, 2020, the interest rate for underpayment is 3%.

Most taxpayers who cannot pay in full have the following payment options:

Online Payment Agreement— These are available for individuals who owe $50,000 or less in combined income tax, penalties, and interest. Businesses that owe $25,000 or less in combined payroll tax, penalties, and interest and have filed all tax returns also have this option. Most taxpayers qualify for this option. Certain fees may apply.
Installment Agreement— Taxpayers who do not qualify to use the online payment agreement option, or choose not to use it, can also apply for a payment plan by phone or by mail by submitting Form 9465, Installment Agreement Request. Installment agreements paid by direct deposit from a bank account or a payroll deduction will help taxpayers avoid default on their agreements. It also reduces the burden of mailing payments and saves postage costs. Certain fees may apply.
Temporarily Delaying Collection— You can contact the IRS to request a temporary delay in the collection process. If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer’s financial condition improves. Penalties and interest continue to accrue until the full amount is paid.
Offer in Compromise— Certain taxpayers qualify to settle their tax bill for less than the amount they owe by submitting an offer in compromise.

Also, taxpayers can consider other options for payment, including getting a loan to pay the amount due. In many cases, loan costs may be lower than the combination of interest and penalties the IRS must charge under federal law.

Final Thoughts

If you are currently unable to pay your tax obligation and need assistance in determining which payment option best meets your needs, contact your local tax professional.

Stay safe. Stay well. Stay home.