Nothing is certain in the world except for death and taxes. Taxes are a rite of passage for most people in the United States and it can be a daunting experience when the deadline rolls around each year.
This is why proper preparation is the key to making the experience as smooth as possible. Filing your taxes in 2020 is a bit different than other years due to the impact of the novel COVID-19 pandemic. This goes for if you are filing your own returns or using the services of a tax returns company.
There have been certain extensions granted by the IRS, but these have the potential to confuse people about tax return dates 2020. This guide gives you some clarity on what these extensions truly mean, when are taxes due and what is expected of you this year when it comes to your tax filings.
Figuring out what you owe
The first port of call is clarifying exactly how your taxes are going to be calculated. Your tax bracket may have changed from one year to another, so you need to remind yourself what sort of system you will be dealing with when calculating and paying your taxes.
While some people like to gather their own tax filing information and work out their tax liability or IRS refund by themselves, others prefer to leave this process in the hands of professionals.
Tax preparers can do all of this for you once you provide them with all of the relevant documents. This can take some of the stress and the fear of making a mistake off your shoulders. These days, the best tax returns companies offer efficient and effective ways for dealing with tax time.
There are many key documents that you need to gather together no matter if you are calculating your taxes on your own or using a specialist service to do so.
You need a W-2 form that indicates how much money you made over the last year and how much money you have paid already in taxes. The 1099 forms are a record of a person or entity that is not your employer who has given you money, such as rental property income.
You also want to gather information relating to any contributions to your retirement account, mortgage interest, property taxes, charity donations, local and state taxes already paid, expenses for education, unreimbursed medical bills and your state and federal tax returns for last year.
Ways you can file your taxes
You have three main options when deciding how to file your taxes on or before the tax return dates in 2020. You are able to fill in an IRS Form 1040 by hand and then mail it to the authorities, you can file the taxes online or you can hire someone to do the filing on your behalf.
Mailing in handwritten forms is a thing of the past and there are a few different things that could go wrong, which is why this option is best avoided. Many people use tax software and prefer to file their taxes online. They will be sure that the tax filing reached its final destination and did not get lost in the mail.
Finally, you can hire a qualified person to complete your tax filing for you and they will submit your filing on your behalf. There are many experts working at US tax return companies today, such as Anthem Tax Services, Community Tax and Optima Tax Relief.
After the COVID-19 pandemic kicked in across the world and the United States, a decision was made by the IRS to move the 2020 federal tax filing deadline to July 15 from April 15. This means that you had until July 15 in order to pay your taxes and submit the 4868 form to request an extension to filing your tax return.
The deadline for filing your tax return was extended to October 15 if you submitted the extension form on time, but many people misinterpreted this as thinking that they have until October 15 to pay their taxes, which is not the case. For those people who did not submit their 4868 form in time, they are not eligible for the extension and they could be looking at possible IRS penalties.
When are taxes due?
If you filed form 4868 before the deadline in July, you were given an additional three months (until October 15) to file your tax return.
If you did not file form 4868 by the July deadline and you also did not file a tax return, then you could be facing some negative consequences. The IRS has the ability to apply interest to your tax bill that is now outstanding, with possible failure to file and failure to pay penalties being implemented.
Consequences of missing the deadline?
If you did not pay your taxes, there will be interest accruing on them. This is because a tax extension only gives you extra time for a return filing and not giving you additional time to pay your taxes.
The usual IRS penalty for late payments is 0.5% each month that the tax is not paid by the deadline in April. The max penalty you will be facing is 25%. As per the IRS rules, you have to pay 90% or more of the tax liability by the normal filing deadline.
There may also be a late filing penalty. This is often a penalty of 5% of the due amount for each month that the tax return has gone past the deadline, with the max penalty being 25% of the total tax liability.
If you have missed any such deadlines, it is very important that you resolve the issue immediately. This means speaking with a tax professional and filing the relevant form and/or payments that you have missed. This will allow you to minimize any negative consequences.
Last minute tax filing tips
Filing taxes can be a stressful process, which means that it is easy for mistakes to occur. Here are some last minute tips and checks to keep in mind before filing your taxes:
1. Double-check everything
It is vital that you double-check all aspects of your tax obligations. This includes making sure that you are aware of the correct tax return dates in 2020, making sure that you have claimed all available tax credits and that you are taking all of the deductions you are entitled to.
The best tax return companies will let you know by what date you need to have all of your relevant information and documents sent to them so they can prepare your return on time.
2. Don’t forget about retirement contributions
A lot of people forget that retirement contributions can decrease your taxable income in a given year, leading to a lower tax bill. The size of tax-free contributions that you can make will change from year to year. For 2020, the limits rose to $19,500 and $6,500 for catchup contributions. The best tax return companies will advise you on exactly how much contributions you can make in a tax-efficient manner in a given year.
Even if you are not maxing out the contributions, it is often advisable to at least contribute the amount that will be matched by your employer if you are enrolled in such a scheme.
3. Be careful who you trust
When tax season is in full swing and the tax return dates in 2020 are fast-approaching, there are a lot of scams doing the rounds. People will get text messages, phone calls and emails from people who claim that they are the IRS. You need to make sure that you give no information to these people, with the IRS only going to send you correspondence via mail.
If you are outsourcing the filing of your taxes to a preparer, you should avoid those that are promising to secure you a significant IRS refund. You don’t want to get involved with a party that is unscrupulous and land you in trouble with the IRS. The best tax return companies will be registered and have a proven track record.
4. Claim all available deductions
You should make sure that you are claiming all deductions that are available to you. People often do not realize that they can claim deductions for certain forms of expenditure, such as charitable contributions.
The likes of education expenses, mortgage interest and medical costs are other possible deductions that you should not forget about. Make sure when claiming deductions that you keep all of the relevant receipts and records in case you are audited. The best tax return companies will often make you aware of the common deductions that people forget about.
Filing taxes is serious business and is not something that you should leave on the long finger or forget about. You need to be fully aware of the tax return dates in 2020. The IRS takes any indiscretions very seriously, with many high-profile cases over the years underlining this point.
Famous mobster Al Capone was not taken down due to his many criminal enterprises, but due to tax evasion. People and companies will be named and shamed publicly if they fall foul of the IRS.
To make the process a lot easier, you can outsource the hard work to an experienced professional. This means that you don’t have to worry about making mistakes when filing, missing tax return dates in 2020 or miscalculating what you owe. These professionals can often save you money by pointing out certain tax exemptions, credits and deductions that you can claim.