Upcoming IRS Deadlines
If you were unable to file your 2019 federal tax return by July 15, and timely filed an extension to file the return, the deadline to file the return is October 15. No additional extensions to file the return are available. There are two exceptions: (1) individuals and businesses who had valid extensions and are in a federally declared disaster area (and sadly there are quite a few) have until January 15, 2021 to file their return and (2) members of the military and others serving in a combat zone have 180 days after they leave the combat zone to file returns and pay the taxes.
The IRS imposes a penalty for late filing a tax return. The penalty is 5% of the amount of tax shown on the return. The penalty is assessed for each month, or part of a month, the return is late. Hence, even if the return is only a few days late, a full month’s penalty will be assessed. The penalty will be imposed for a maximum of 5 months (25%). In the event the return is filed more than 60 days late, the IRS will impose a minimum failure to file penalty of the lesser of 100% of the tax shown to be due on the return or $435. If the IRS determines that the failure to file the return was fraudulent, the failure to file penalty is increased to 15% per month up to a maximum of 75%.
It is important to understand that the extension of time to file a tax return is not an extension of time to pay any tax which may be due. If you did not pay any taxes you owed by July 15, 2020, you incurred a failure to pay penalty. This penalty is .005% (1/2 of 1%) for each month, or part of a month, the tax is not paid. Like the failure to file penalty, a full month’s penalty is charged even if the payment is made within the month. The maximum amount of the failure to pay penalty is 25%. In the event both the failure to file and the failure to pay penalties apply in a particular month, the failure to file penalty will be reduced by the failure to pay penalty for that month.
Penalties are not the only charges the IRS will impose if your return is not timely filed or taxes not timely paid. The IRS will also assess interest. The interest accumulates daily and does not stop accruing until the balance is paid in full. The interest rate for the third and fourth quarters of 2020 is 3%.
The October 15, 2020 filing deadline also applies to individuals who are not required to file returns, but are eligible to receive the economic impact payment (stimulus). Although over 160 million stimulus payments have been issued, there are still close to 9 million individuals who have not received their payment. These individuals have until October 15 to register at irs.gov in order to get their stimulus payment this year. If they do not timely register, then these non-filers will have to wait until the filing of their 2020 return next year to claim, and receive, the stimulus payment.
And speaking of next year’s return, the IRS has announced that the 1040 return for 2020 will be available in Spanish for the first time. In addition, the return will provide the taxpayers an opportunity to indicate that they wish to be contacted in a language other than English. The IRS publication “Your Rights as a Taxpayer” is available in 20 languages and the 2020 version of the publication “Your Federal Income Tax” will be available in seven languages. The IRS website will also have many pages available in seven languages and basic tax information on the site will be available in 20 languages.