New IRS Tax Deadlines Could Help Business Owners Conserve Cash During Coronavirus Crisis
The coronavirus/COVID-19 pandemic is causing massive changes to almost every area of life, and now tax time is one of them: The IRS has announced that Tax Day is being moved to July 15. The deadlines for filing individual tax returns and for making payments of 2019 taxes owed (up to a certain limit) are being extended by 90 days, from April 15 to July 15, 2020.
Everyone is getting an extra three-month reprieve on the deadline to file their federal taxes, and taxpayers who owe taxes will no longer be bound by the usual April 15 deadline to pay their tax bill for 2019. If you and your business are feeling stress from the coronavirus crisis, this tax deadline extension may help relieve the pressure.
If you owe taxes for 2019 and were planning to send the federal government a check by April 15, you have extra time to pay your tax bill. This deadline extension applies to all U.S. taxpayers who owe federal taxes, but it could particularly help small business owners who often are more likely to owe money at tax time.
What Is the IRS Tax Payment Deadline Extension?
This is an extension of the deadline for filing and paying individual tax returns and business returns that would have been due on April 15th. Keep in mind: This deadline extension does not affect the filing of your business tax returns if you were required to file by March 15 (LLCs taxed as partnerships and S corporations, for example).
Which Taxpayers Are Included in the Deadline Extension?
According to the IRS website, the payment deadline extension includes individual taxpayers (all individual returns), self-employed individuals and all business entities other than S Corporations. Any of these taxpayers can defer payments on up to $1 million of 2019 tax until July 15, 2020.
So, if you own an LLC, keep in mind that your LLC is a “pass-through entity” and does not owe taxes; instead, your business income passes through to your individual tax return, and you will pay taxes as an individual. If you owe taxes for 2019, you now get a little extra time to make that payment.
If you own a C Corporation, your corporate income tax payment deadline is also extended to July 15, 2020, for up to $10 million of 2019 taxes.
How Does This Tax Extension Affect Business Owners?
Many business owners tend to owe money to the IRS and are more likely than W-2 employees to owe money at tax time. People who work as employees often have extra tax payments withheld from their paychecks throughout the year, and then they get a refund at tax time.
However, because of the complexities of business taxes, many business owners are more likely to end up in situations where they owe some tax on the previous year’s income.
Also read: Tax hacks that small business owners miss.
What If I’m Requesting a 6-Month Extension on Filing My 2019 Tax Return?
If you have filed for a six-month extension on filing your 2019 tax return, the tax payment deadline still applies to you and can still help you. Normally, when you get an extension on filing your tax return, you are still expected to pay your tax bill by April 15.
This tax payment deadline applies to every eligible taxpayer, even if they have asked for an extension on filing their return. For example, you could get a six-month extension on filing your taxes (your 2019 tax return is now due on October 15, 2020), but now instead of having to pay your tax liability by April 15, you have until July 15 to make the payments.
Will I Be Charged Penalties for Using This Tax Payment Deadline Extension?
No. As long as you pay your taxes by July 15, 2020, you will not owe any penalties or interest. However, if you do not pay your taxes by the extended deadline, penalties and interest will begin to accrue on July 16, 2020, for any unpaid balances.
What If I’m Getting a Tax Refund?
If you are expecting a tax refund, go ahead and file your taxes as soon as you can and wait for your refund to arrive in the normal manner. If you don’t owe any more taxes for 2019, this tax payment deadline extension doesn’t affect you. Enjoy your tax refund.
How Will This Tax Payment Deadline Extension Help Businesses?
The coronavirus/COVID-19 crisis is hitting a lot of businesses hard, small and large, especially in the restaurant and retail industries where many small shops and brick-and-mortar establishments have been forced to temporarily close. If your business is suddenly facing a loss of revenue, getting a three-month extension on filing and paying your taxes might help you improve cash flow during a tough time.
These are unprecedented times, and the IRS is offering an unprecedented bit of special help by giving taxpayers three extra months to file their tax returns and pay their tax bills. If you owe taxes for 2019, feel free to take advantage of this extra time. During moments of uncertainty, it can be especially useful to have some extra cash in the bank to manage your business expenses, pay employees or invest in growth.
Learn more about the IRS tax payment deadline extension.
Follow the IRS website for more information on the coronavirus crisis and how it might affect your taxes.
If you need professional tax help, check out Incfile’s business accounting service. Incfile can help you connect with a certified tax professional to help answer your questions and file your business and personal tax returns.
Related Read: We’ve Got All The Last Minute Tax Tips You Need