Why You Need To File Your 2019 Taxes By July 15, 2020

By: Laura Saunders, WSJ

July 10, 2020 5:30 am ET

No matter how stressed or financially stretched you are this year, file tax forms with the Internal Revenue Service by July 15. Not doing so will only make your bad situation worse.

The deadly coronavirus pandemic has upended the lives and finances of millions of Americans, leaving the U.S. with about 15 million fewer jobs than in February. In response, the IRS issued a historic emergency declaration easing a host of requirements. For the first time, it delayed the traditional April 15 filing deadline by three months.

Now the July 15 deadline to file 2019 taxes is days away, while many Americans’ lives are still in disarray. Some, feeling overwhelmed, may be tempted to ignore their taxes.

That would be a huge mistake: If you owe Uncle Sam, blowing off tax filings has immediate consequences that compound and are almost impossible to escape, because the IRS is the most powerful creditor in the nation.

“To get its money, the IRS can file a lien on your property that wrecks your credit, seize your bank account, and take your wages. It can even get money from your IRA or 401(k) savings account, and you’ll owe tax on the withdrawal,” says Bryan Skarlatos, a criminal tax attorney with Kostelanetz & Fink in New York.

However, taxpayers can take steps to minimize the damage if they can’t pay in full or at all. With tax debts, small moves can mean big differences.

Here’s an example: Two of the IRS’s most potent penalties are for failure to file a return and failure to pay tax. If someone doesn’t file or pay $1,000 of tax for a year, then the failure-to-file penalty adds $435 to the bill and the failure-to-pay penalty adds $60. The $495 total is often far higher than credit card interest on a similar amount.

Interest is also due on unpaid taxes and penalties. It compounds daily, currently at an annual rate of 3%. In this case it adds another $45 after a year. Smaller penalties may apply as well.

But say this same taxpayer files the IRS form to get an automatic three-month filing extension by July 15 and then files a return by Oct. 15. Even if this person can’t pay the balance due, filing the return on time removes the large failure-to-file penalty. If this person can pay something, the cost can shrink further.

The IRS isn’t known for its mercy, but it has programs and other measures for taxpayers who can’t pay what they owe. These can be confusing, especially for filers who haven’t used them before, so here are steps to take and pitfalls to avoid in this extraordinary tax year.

• File something by July 15. As the example above shows, the failure-to-file penalty is immediate and large.

Be sure your return is accurate, and try to file it by July 15. If that’s impossible, then file IRS Form 4868 by July 15 to get an automatic three-month extension to prepare the form until Oct. 15.

There’s no extension to pay your tax, so interest on what you owe starts accruing on July 15 even though you have an extension to send in the return and may not know exactly what you owe yet.

If you miss these deadlines, file as soon as possible. Bottom line: If you can’t pay, you should still file.

• Know which excuses work. The IRS abates penalties for “reasonable cause,” with the pandemic as a possible cause this year.

Still, the reasonable-cause defense has limits. For example, a family death or serious illness three years ago probably won’t count as an excuse to be late in filing or paying 2019 taxes.

Taxpayers with a clean record until their lapse can often receive a “first-time abatement” because of prior good behavior.

• Understand the IRS’s payment plans. It can be fairly simple to pay back taxes to the IRS. To qualify for a short-term payment agreement, you must owe $100,000 or less in taxes, penalties and interest and be able to pay within 120 days. Usually, this plan can be set up quickly online at IRS.gov. There’s no set-up fee for online agreements.

Taxpayers who need longer than 120 days to pay and owe less than $50,000 can opt for an installment agreement. For many, the online set-up fee is $31 for a plan with direct monthly debits and $149 for one without monthly debits.

• Consider how to raise funds. Mr. Skarlatos warns that penalties and interest continue to compound on unpaid taxes if you use an IRS payment plan. So he recommends borrowing the funds from a bank, a 401(k), a relative or even a credit card, if possible. Congress eased terms for 401(k) loans due to the pandemic.

• Beware of sales pitches promising miracles. For taxpayers who can’t pay the IRS in full, a program known as Offers in Compromise may accept a lower amount in settlement. Some firms promising to secure these offers advertise on radio or TV.

The IRS typically accepts less than 40% of offers it receives. Fees to firms that advertise them can be high and include recurring charges while the IRS considers a proposal over many months.

IRS Commissioner Chuck Rettig urges taxpayers seeking an offer in compromise to check with the IRS first.

“To hear some of these ads, struggling taxpayers can think their tax debts will magically disappear. Many people can avoid unnecessary disappointments and fees by quickly reviewing the program or asking an IRS representative,” he adds.

• If all else fails… The IRS won’t pursue tax debtors if that leaves them without living expenses. In this case, the account is designated as “currently not collectible” and the IRS pauses collections, usually for up to a year. Penalties and interest continue to accrue.

To qualify for this status, says Szu-Ju Chang, an attorney in Las Vegas who has worked extensively with low-income taxpayers, a person will need to provide detailed information about income, expenses, and assets for the IRS to assess.

For more information, contact the Taxpayer Advocate Service or a low-income taxpayer clinic.

https://www.irs.gov/

Two New Refundable Payroll Tax Credits Available Now

COVID-19 paid leave tax credits for
small and midsize businesses

Small and midsize employers can claim two new refundable payroll tax credits. The paid sick leave credit and the
paid family leave credit are designed to immediately and fully reimburse eligible employers for the cost of providing
COVID-19 related leave to their employees.
Here are some key things to know about these credits.
Coverage
• Employers receive 100% reimbursement for required paid leave.
• Health insurance costs are also included in the credit.
• Employers do not owe their share of social security tax on the paid leave and get a credit for their share of
Medicare tax on the paid leave.
• Self-employed individuals receive an equivalent credit.
Fast funds
• Reimbursement will be quick and easy.
• The credit provides a dollar-for-dollar tax offset against the employer’s payroll taxes
• The IRS will send any refunds owed as quickly as possible.
To take immediate advantage of the paid leave credits, businesses should use funds they would otherwise pay to the
IRS in payroll taxes. If those amounts are not enough to cover the cost of paid leave, employers can request an
expedited advance from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.
For details about these credits and other relief, visit Coronavirus Tax Relief on IRS.gov.
Share this tip on social media — #IRSTaxTip: COVID-19 paid leave tax credits for small and midsize businesses.
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Johnson County Real Estate Appraisal Appeals

Many Johnson County homeowners saw significant increases in the 2020 appraised value.  An appeal must be filed within 30 days of the NOTICE OF APPRAISED VALUE mailing date from the county.

Many property owners have requested that the county extend the informal appeal deadline due to the stay at home orders and COVID-19.  The county acknowledges the problem and by law must continue with the same date of filing an appeal.  The appeal process does not limit or make final the appraised value and you have one more opportunity to request a revaluation.

You must still file the first half of the 2020 tax payment – so do not wait to pay your taxes if you feel it is overvalued.  That will lead to fines or penalties that will cost you more than any tax savings.

If you have a mortgage and paying taxes through escrow, coordinate the filing of the Payment Under Protest with them or submit directly PRIOR to the due date of May 11, 2020.

See the attached letter, information and websites from the County Appraiser on the process for filing an appeal through the Payment Under Protest.

 Unfortunately, the Appraisers Office does not have the authority to extend this date. There is another appeal option available for taxpayers: https://jocogov.org/article/2020/04/03/13124

Payment Under Protest form: https://www.jocogov.org/sites/default/files/documents/TRE/PRApp.pdf

https://www.jocogov.org/dept/appraiser/home

https://www.jocogov.org/dept/treasury-and-financial-management/home

https://www.jocogov.org/dept/treasury-and-financial-management/real-estate-and-personal-property-tax/property-tax-forms

Update: Stimulus Payments and Social Security Recipients

The IRS has announced that Social Security recipients will automatically receive economic impact payments.

Those receiving Social Security benefits who don’t typically file a tax return will not need to file an abbreviated (simple) tax return to receive their stimulus payment.  The IRS will use information from Forms SSA-1099 and RRB-1099 to generate payments for these individuals. The payment will be sent as a direct deposit or check, however they normally receive their benefits.

From the IRS news release: “We want to ensure that our senior citizens, individuals with disabilities, and low-income Americans receive Economic Impact Payments quickly and without undue burden,” said Secretary Steven T. Mnuchin. “Social Security recipients who are not typically required to file a tax return need to take no action.”

Based on the latest information I have, the IRS still plans to offer an online portal for the purpose of collecting direct deposit information from taxpayers who have not provided it on their 2018 or 2019 tax return.

Providing account information is not required to receive a stimulus payment.

Checks will be mailed if deposit information is not available.

At this time, I haven’t received guidance regarding low-income taxpayers who are not required to file a return and don’t receive Social Security benefits. My best advice at this time is to wait for further information from the IRS.

AICPA-led Coalition Urges Expedited Small Business Funding Via Payroll

AICPA, Paychex, Intuit and IFA Say Speedy Relief Required to Prevent Layoffs Due to Pandemic

WASHINGTON, D.C. (March 22, 2020) – A coalition made up of the American Institute of CPAs (AICPA), the International Franchise Association (IFA) and two leading payroll processing companies, Paychex and Intuit, issued the following open letter to President Donald J. Trump, U.S. Treasury Secretary Steven Mnuchin, Small Business Administrator Jovita Carranza and members of Congress:

Our nation is taking unprecedented steps to address the current coronavirus pandemic, keep our citizens safe and American workers on the job. Broad governmental proposals for bank loans and direct loans are good steps, and fast action is required. We need to quickly take an additional step to ensure small businesses continue to keep their employees paid.

Small businesses are the heart of the American economy and employ roughly 60 million people. We know the impact that layoffs have on workers’ lives and business operations, so it’s critical we keep as many people on the payroll as possible.

The problem: It takes time to create new processes to distribute funds to small businesses – speed is of the essence here. An efficient and effective process would be to leverage established small business payroll processing that is already in place and can be marshalled immediately to protect jobs and preserve resiliency within the small business sector.

Payroll processors produce approximately 40 percent of all payroll payments in the United States, and their customers are mostly small businesses of 500 employees or less. We urge the federal government to use these existing systems to direct funds to small businesses so they can make payroll and not shut down due to restrictions caused by the pandemic. In this scenario, the federal government could set up a central payroll funding account that small business payroll processors could utilize so that millions of small businesses could continue paying workers during this time of crisis.

This direct funding of payroll accounts will not solve all the funding problems currently facing small businesses, but it’s a step in the right direction and has numerous benefits. It is a faster and more efficient process that does not require small businesses to get loans, and it ensures employees directly receive money. In addition, small businesses that use this federal funding facility would be required to maintain their workforce, which would dramatically reduce layoffs.

We believe multiple initiatives and tools are required to keep small businesses in operation. The direct payments and loans to small businesses will play an important role, but we recognize these will take weeks to implement. We are also convinced that proposed direct payments to individuals will not prevent small businesses from laying off employees. Small businesses need to make payroll now – the clock is ticking.

As the federal government focuses its attention on America’s economic engine – small businesses and their millions of employees – direct funding of their payroll can help. The payroll processing companies and the 45,000-plus CPA rms in America have long been partners in helping small businesses thrive in good times, and we have a role to play in the grave challenges we face today.

The program would not cover all small business employees, such as gig-economy workers, who would need to be supported through other measures. But we have the expertise and systems in place to help a significant part of the small business sector and its employees, many of whom are hourly workers who are most in need.

We want to help the federal government move quickly and aggressively, as we know that many employees who are laid off will not be rehired immediately. Small businesses will wind down operations, and it will be difficult to cycle back up.  The pandemic will pass, but the economic impact will last.  Ensuring we can rebound quickly is essential for the long-term health of our economy. 

About the American Institute of CPAs The American Institute of CPAs (AICPA) is the world’s largest member association representing the CPA profession, with more than 429,000 members in the United States and worldwide, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. The AICPA sets ethical standards for its members and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives professional competency development to advance the vitality, relevance and quality of the profession.

About the Association of International Certified Professional Accountants The Association of International Certified Professional Accountants (the Association) is the most influential body of professional accountants, combining the strengths of the American Institute of CPAs (AICPA) and The Chartered Institute of Management Accountants (CIMA) to power opportunity, trust and prosperity for people, businesses and economies worldwide. It represents 657,000 members and students across 179 countries and territories in public and management accounting and advocates for the public interest and

https://www.aicpa.org/press/pressreleases/2020/coalition-urges-expedited-small-business-funding-via-payroll-processors.html?j=266226&sfmc

All Taxpayers Should Know Their Rights

The Taxpayer Bill of Rights protects all taxpayers working with the IRS. In fact, they lay out the framework to make sure the IRS fairly and impartially carries out tax administration.

These rights are explained on IRS.gov and in Publication 1, Your Rights As A Taxpayer. They describe what taxpayers can expect if they need to work with the IRS on a personal tax matter, such as:
•Filing a return
•Paying taxes
•Responding to a letter
•Going through an audit
•Appealing an IRS decision

To help taxpayers understand their rights, here they are, along with links where people can go for more information.

1.The right to be informed
2.The right to quality service
3.The right to pay no more than the correct amount of tax
4.The right to challenge the IRS’s position and be heard 
5.The right to appeal an IRS decision in an independent forum
6.The right to finality
7.The right to privacy
8.The right to confidentiality
9.The right to retain representation
10.The right to a fair and just tax system


More information:
Publication 1, Your Rights As A Taxpayer, in Spanish
What the Taxpayer Bill of Rights Means for You
Taxpayer Advocate Service

Share this tip on social media — #IRSTaxTip: All taxpayers should know their rights. https://go.usa.gov/xpSgv

2020 Standard Mileage Rates Go Down

For this calendar year, the IRS has issued guidance by notice of the current year mileage rates.  There are 4 primary areas where standard mileage has guidance that can (sometimes) be used:

Business Mileage:  57.5 cents/mile down from 58 cents/mile in 2019 (Refer to Note 1)

Charitable Mileage: 14 cents/mile with no change from 2019

Medical Mileage: 17 cents/mile down from 20 cents/mile in 2019

Moving Mileage: 17 cents/mile down from 20 cents/mile in 2019 (Refer to Note 2)

NOTE 1:  Business mileage is rules still exist on substantiation of records – is it a written log.  The deductibility for unreimbursed business mileage for employees (subject to the 2% itemized deduction floor) has been suspended from 2018 until 2026 by the TCJA (Tax Cuts & Jobs Act). However, there are some very narrow and limited exceptions to this rule. If you a small business, you can elect to reimburse for mileage at the applicable rate listed each year.  It is important that you have a set policy and procedure to follow all IRS guidelines for this.

NOTE 2:  Moving mileage has been suspended under the TCJA.  However, there is an exception for Military personnel who move pursuant to a military order or incident to a permanent change of station. 

There are additional items related to the deductibility at the standard mileage rate contained in the tax code that should be followed.  There is still the option for businesses to deduct actual costs and depreciation as well as the “fleet-average valuation rules”. There are additional rules and regulations that should be considered and discussed with you tax preparer prior to make sure you are in compliance as well as maximizing your deductible vehicle expenses.

FROM THE IRS:This notice provides the optional 2020 standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes.  This notice also provides the amount taxpayers must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate (FAVR) plan.  Additionally, this notice provides the maximum fair market value (FMV) of employer-provided automobiles first made available to employees for personal use in calendar year 2020 for which employers may use the fleet-average valuation rule in § 1.61-21(d)(5)(v) of the Income Tax Regulations or the vehicle cents-per-mile valuation rule in § 1.61-21(e).

Prepare For Filing Taxes

Charitable Contributions

For most taxpayers, December 31 is the last day to take actions that will impact their 2019 tax return. For example, those who plan to itemize deductions should know that charitable contributions are deductible in the year made. Donations charged to a credit card before the end of 2019 count for the 2019 tax year, even if the bill isn’t paid until 2020. Checks to a charity count for 2019 if they are mailed by the last day of the year.

Retirement Plans

Taxpayers who are over age 70 ½ are generally required to take distributions from their individual retirement accounts and workplace retirement plans by the end of 2019. However, a special rule allows those who reached 70 ½ in 2019 to wait until April 1, 2020, to receive them.

Most workplace retirement account contributions should be made by the end of the year, but taxpayers can make 2019 IRA contributions until April 15, 2020. For 2019, the basic limit for 401(k) contributions is $19,000, plus another $6,000 for those who are at least age 50.

For 2019, total contributions to all traditional and Roth IRAs cannot exceed $6,000, or for taxpayers age 50 and older, $7,000. Taxpayers should check IRS.gov for more information about contribution limits, as well as cost-of-living adjustments affecting pension plans and other retirement-related items for tax year 2019.

Some taxpayers may be eligible for the Retirement Savings Contributions Credit, also known as the Saver’s Credit. The income limit is $64,000 for married couples filing jointly, $48,000 for heads of household, and $32,000 for singles and married individuals filing separately for 2019.

Refunds

The vast majority of taxpayers get their refunds faster by filing electronically and using direct deposit. It is simple, safe and secure. This is the same electronic transfer system used to deposit nearly 98% of all Social Security and Veterans Affairs benefits into millions of accounts.

Just as each tax return is unique and individual, so is each taxpayer’s refund. Here are a few things taxpayers should keep in mind if they are waiting on their refund but hear or see on social media that other taxpayers have already received theirs.

Different factors can affect the timing of a refund. Even though the IRS issues most refunds in less than 21 days, it’s possible a particular taxpayer’s refund may take longer. Some tax returns require additional review and take longer to process than others. It may be necessary when a return has errors, is incomplete or is affected by identity theft or fraud. The IRS will contact taxpayers by mail when more information is needed to process a return.

By law, the IRS cannot issue refunds to people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law requires the IRS to hold the entire refund, including the portion not associated with the credits. This helps ensure taxpayers receive the refund they’re due by giving the IRS more time to detect and prevent fraud.

Taxpayers should not count on getting a refund by a certain date, especially when planning major purchases or paying other financial obligations.

Update address

Taxpayers who moved during 2019 should tell the US Postal Service, employers and the IRS. Notify the IRSby mailing IRS Form 8822, Change of Address, to the address listed on the form’s instructions. Taxpayers who purchase health insurance through the Health Insurance Marketplace should also notify the Marketplace when they move out of the area covered by their current plan.

For name changes due to marriage or divorce, notify the Social Security Administrationso the new name will match IRS and SSA records. Also notify the SSA if a dependent’s name changed. A mismatch between the name shown on a tax return and SSA records often causes refund delays.

https://www.irs.gov/newsroom/get-ready-for-taxes-what-to-do-before-the-tax-year-ends-december-31