Coronavirus and Your Taxes: Everything You Need to Know
Doing one’s taxes is stressful enough on its own. Add the threat of a global pandemic and job insecurity and you have a recipe for additional chaos and confusion. Every aspect of the global financial system is currently affected, including the stock market and credit card payments. Taxes remain an essential part of peoples’ financial responsibilities, but they have adapted to the current pandemic situation. Here’s what you need to know about the changes.
Filing your taxes isn’t a must for stimulus checks
A lot of people are wondering if they need to get their taxes in order so that they can receive benefits during this time. The stimulus checks do depend on your tax report, but they don’t necessarily have to come from your 2019 tax return. If you haven’t yet filed your taxes, the IRS will simply look at an older report from 2018 to determine whether or not you’re eligible.
On the other hand, if you haven’t filed them since before 2018, the IRS will require that you present a “simple” tax return. It hasn’t yet been determined what falls under a simple tax return, but the IRS will eventually release an update. Social security recipients and railroad retirees are exempt from making simple tax returns and will receive the stimulus money either way.
Deadlines have been moved forward
While the current situation has people stressed out about a lot of things, taxes shouldn’t be one of them. The IRS has moved deadlines to allow individuals to file and pay their taxes on a more reasonable timeline.
Instead of having to prepare your taxes by the fifteenth of April, the deadline has been moved to the fifteenth of July. This applies to federal taxes as well. The extra three months should be enough for most, but there’s a backup extension that can further delay this until October. Beware, missing out on this third deadline will incur interest and penalties.
Filing taxes can still be done for free
Seventy percent of taxpayers that are eligible for the IRS Free File program can continue filing their taxes for free. Free filing software from partners like H&R Block, TaxAct, and TurboTax is still available to households that earn sixty-nine thousand dollars or less on an annual basis. To confirm eligibility, you must visit the Free File page on the IRS’s website.
In 2020, the standards for the Free File providers have been tightened, making it easier to find these options. While these options reduce the number of unnecessary fees, they don’t eliminate them entirely. There are still state-specific filing fees that could pop up at any time. There might also be file returns if your income goes over sixty-nine thousand, but the providers will alert you to this.
Tax refunds won’t be delayed
Luckily, the answer is no. The IRS has estimated that there will be no delays when issuing refunds for any individuals. Tens of millions of refunds have already been processed this year, and the situation hasn’t affected the rest.
If you own an investment property, now’s the time to start filing a tax depreciation report. It will help you get a good idea of what your property is like and it will deduct a solid amount of funds from your taxes.
There are few penalties for early withdrawal
The CARES act is allowing taxpayers to withdraw money from their retirement accounts without the usual ten percent penalty that comes with it. This applies to workers that face problems due to the coronavirus epidemic.
The withdrawals might not have a penalty, but they are still taxable. The good news is that it’s over three years. Escaping the additional tax is as easy as returning the funds you’ve withdrawn before the three years are up. Keep in mind, the returns don’t affect retirement account contribution caps.
Conclusion
The financial implications of the coronavirus situation are not very predictable. The story is changing by the hour and people aren’t sure how to react. Filing your taxes is not an immediate priority, but it’s something that you need to consider. As the situation stabilizes you can be sure that filing taxes will continue as per usual and not cause any complications.
