As a self-employed contractor who has suffered from the coronavirus pandemic, I have been researching all the government programs that came out of the CARES Act 2020. While this is not meant to be tax advice and your situation could be different than mine, here are some things that may be helpful as you plan your cash flow and tax obligations.
Tax deadlines postponed
Your taxes for 2019 are due on July 15, 2020 rather than April 15, 2020. If you are expecting a refund, obviously, you should file as soon as possible so that you can get your refund. However, if you owe money to the IRS, then, you will have time until July 15.
What to do if you have already filed your taxes before the new deadlines were announced? Good question, because that is what happened to me. I filed my taxes using TurboTax in February and instructed the IRS to deduct my due amount on April 15 but learned from my research that TurboTax or any other software that you used will not allow you to go in and simply edit the date. Unfortunately, the IRS is unable to automatically reschedule the debit date.
If you are in a similar situation, call 888-353-4537 to make a payment cancellation request no later than 11:59 p.m. ET two business days prior to the scheduled payment date. Make sure that you have your tax return copy in front of you to verify some information. You will not speak to a human and can cancel the debit. While there are several options to make the actual payment electronically, I am personally planning to simply write an old-fashioned check and mail it with the IRS Form 1040-V.
For your state taxes, yet once again, check with your state. In Massachusetts, after speaking to an agent on the phone, he told me that he would need something in writing from me (either mailed or faxed) or I could simply sign up with the state through Mass Tax Connect. When I created an account, I could see the scheduled payment (since I owe money) and was able to edit it and reschedule it for July 15.
Estimated taxes deadlines postponed
Since my income can vary significantly from year to year, I am a big fan of the safe harbor provision. Basically what you do is to pay 110 percent of your previous year's taxes. If you do this, you won't have to pay an estimated tax penalty, no matter how much tax you owe with your tax return. In case you overpaid, you simply get a refund.
Now for this year alone because IRS is allowing self employed individuals to delay their share of the 12.4% of self employment income to December 31, 2021 (half) and December 31, 2022 (the remaining half). What it means is that when you make your estimated payments this year, they can be half of what you would pay using the 110% safe harbor above and will pay the rest in 2021 and 2022 with your taxes. It can be confusing, so it does not hurt to hire a tax expert for one hour of consultation and get it all figured out. To be super-safe, and if you can afford it, just pay what you would pay every year and simply get a refund.
Also, the states are free to make their own deferrals, and it is a good idea to check with your state.
The IRS has extended the April 15 and June 15 payment deadlines to July 15.
The states are free to do whatever they want so make sure that you check with your state. In Massachusetts, where I live, both April 15 and June 15 deadlines have been moved to July 15.
Tax deadlines postponed
Your taxes for 2019 are due on July 15, 2020 rather than April 15, 2020. If you are expecting a refund, obviously, you should file as soon as possible so that you can get your refund. However, if you owe money to the IRS, then, you will have time until July 15.
What to do if you have already filed your taxes before the new deadlines were announced? Good question, because that is what happened to me. I filed my taxes using TurboTax in February and instructed the IRS to deduct my due amount on April 15 but learned from my research that TurboTax or any other software that you used will not allow you to go in and simply edit the date. Unfortunately, the IRS is unable to automatically reschedule the debit date.
If you are in a similar situation, call 888-353-4537 to make a payment cancellation request no later than 11:59 p.m. ET two business days prior to the scheduled payment date. Make sure that you have your tax return copy in front of you to verify some information. You will not speak to a human and can cancel the debit. While there are several options to make the actual payment electronically, I am personally planning to simply write an old-fashioned check and mail it with the IRS Form 1040-V.
For your state taxes, yet once again, check with your state. In Massachusetts, after speaking to an agent on the phone, he told me that he would need something in writing from me (either mailed or faxed) or I could simply sign up with the state through Mass Tax Connect. When I created an account, I could see the scheduled payment (since I owe money) and was able to edit it and reschedule it for July 15.
Estimated taxes deadlines postponed
Since my income can vary significantly from year to year, I am a big fan of the safe harbor provision. Basically what you do is to pay 110 percent of your previous year's taxes. If you do this, you won't have to pay an estimated tax penalty, no matter how much tax you owe with your tax return. In case you overpaid, you simply get a refund.
Now for this year alone because IRS is allowing self employed individuals to delay their share of the 12.4% of self employment income to December 31, 2021 (half) and December 31, 2022 (the remaining half). What it means is that when you make your estimated payments this year, they can be half of what you would pay using the 110% safe harbor above and will pay the rest in 2021 and 2022 with your taxes. It can be confusing, so it does not hurt to hire a tax expert for one hour of consultation and get it all figured out. To be super-safe, and if you can afford it, just pay what you would pay every year and simply get a refund.
Also, the states are free to make their own deferrals, and it is a good idea to check with your state.
The IRS has extended the April 15 and June 15 payment deadlines to July 15.
The states are free to do whatever they want so make sure that you check with your state. In Massachusetts, where I live, both April 15 and June 15 deadlines have been moved to July 15.