What to Know About the July 15 Tax Deadline
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Taxes aren’t typically a hot topic in late June – but there’s been nothing typical about 2020, and its tax season is no exception. As you probably know, earlier this year the IRS agreed to postpone Tax Day for individuals and C-corporations from April 15 to July 15 2020…which means that if you fall into those groups, Tax Day is less than a month away.
If you’re still not quite ready, don’t panic. Here’s what you need to know.
You Can Still Get an Extension to File
Let’s get this out of the way right now: if you aren’t ready to file your taxes on July 15, you don’t have to.
In normal years, businesses can apply for an automatic six-month extension to file, moving the deadline from April 15 to October 15 for C-corporations. Even though the April deadline has moved, you can still apply for and receive an extension to October 15, so long as you do so by the new deadline of July 15. The process remains the same, using IRS Form 7004.
As in typical years, there’s no penalty to taking the extension. For many businesses, 2020 has been a wild ride, and sorting out last year’s taxes may not have been top of mind. If you or your tax preparer need more time, taking the extension is a simple way to give yourself some breathing room.
Payment is Still Due July 15
The terms are often used interchangeably, but filing and paying your taxes are not actually the same thing. It’s an important distinction to understand, however, especially if you’re getting an extension.
- Filing your taxes is an official statement of what your income was, and what income taxes you owe (or don’t). If the IRS audits you, it will be checking to make sure that your statement was correct. All businesses are required to file, whether or not they actually owe income taxes.
- Paying your taxes, if you owe them, is a separate transaction. The IRS actually requires you to pay a portion of your estimated tax total each quarter, though this year’s payment due April 15 was delayed to July 15.
If you file for the automatic extension, you have until October 15 to file your taxes. Any payment you may owe, however, is still due July 15. The IRS specifies that there are no late penalties or interest on tax payments up to 7/15, but that these start accruing on 7/16. If you expect to owe income taxes, be sure to pay your estimated tax on time! If you later discover that you overpaid, you can get a refund when you actually file your taxes.
You Can Still Claim Tax Credits
The delayed filing date did not affect eligibility for tax relief like the R&D Tax Credit. You can still claim the credits, the same as a normal tax year, and the same documentation and eligibility requirements apply.
If you qualify for the R&D Tax Credit, this could be a good year to claim it. The potential savings can be substantial, which could be a big help to your business in a challenging economy. Keep in mind, however, that you’ll need enough time to cover the extensive documentation requirements. The extension through October will make it much more feasible to claim this year.
The PPP Won’t Be Included
Remember that July 15 is the filing date for your 2019 taxes, which means anything that’s happened since January will be reflected in next year’s filing. This includes anything related to whether your business received a PPP loan.
However, you should be keeping meticulous records now about anything related to the PPP. First off, you’ll need those records to prove if you qualify for either full or partial PPP loan forgiveness. Secondly, the IRS has indicated that companies who took PPP loans may not be able to deduct some expenses that they normally would. If you make a mistake on what you can and can’t deduct, it could spell trouble in an audit.
Don’t leave a mess for your future self to clean up! Carefully document your PPP-related expenses as you go, so that you’ll have the information you need, when you need it (and don’t be afraid to call in professional help).
Refunds Might Be Delayed
COVID-19 significantly disrupted normal operations for practically every organization in the US, and the IRS is no exception. IRS workers are now starting to come back to the office, with a considerable backlog of paper filings to work through.
You’re probably filing electronically, which will likely help speed things up, but any refunds may take longer than usual to arrive. If you’re expecting a refund on tax payments, it’s probably best not to rely on having that money on hand to offset operating expenses (here’s some ways to lower them instead).
The bottom line? This year may be an unusual tax season, but most of your responsibilities and opportunities haven’t changed. One more thing that hasn’t changed: if you need tax help, we’re here for you.