I just want to remind people that if you haven’t filed your tax return as of yet, those returns are going to be due in less than a month, or July 15, 2020.
So what happens if someone can’t file before July 15? Is there an extension, and if so, how does that work?
It works the way it has in the past. Normally we’d have to file our returns by April 15, but of course this year COVID-19 moved it back to July 15. And even at that time, all returns were due as of Oct. 15, and nothing really changes. So what will happen is there will be a three-month extension that everybody gets if they can’t file it by July 15. So they have until Oct. 15. Just like the rules used to work, the taxes that are owed—they have to be paid by July 15.
So what if they cannot pay the tax that is owed by July 15?
- So one of the things that you want to do for sure is you either want to get that return filed, or at least an extension, even if you can’t make the payments. It’ll avoid things like a late filing penalty, and that penalty can be pretty, pretty harsh.
- I also recommend: Pay what you can. Even if you can’t pay it all, pay a little bit so that it’s not such a big amount later that you have to come up with.
- Definitely contact the IRS, because they’re willing to work with you. They want you to set up a payment schedule. Either you can contact them directly (which might be a little more difficult now with COVID-19), but you can go to their website and set up a plan, which may actually be easier. This is actually going to help out, because it may reduce or eliminate some of the penalties; now, not the interest, but the penalties.
In other words, make sure you’re proactive; don’t wait for them to come get you.
So what should people do, or what should they look at for 2020, so they’re not in a similar position?
We’ve talked about this on prior shows, but definitely adjust your withholding, or maybe even set up estimated tax payments. Find a way to get those amounts paid in beforehand, so it’s not such a big amount that’s due here at either April 15 (or this year July 15).
So I know a few people in the opposite position: They filed their return, but have not yet received their refund yet. Why is that?
Yes, we’ve gotten a lot of people that have called us on that, actually. And in the past, it wasn’t as big of a deal as it is now, because what they’ll end up doing is they’ll go to the IRS website and they’ll check their refund status and usually it’ll say the return is still processing. And that might be—you know, you may have filed your return back in March or maybe early April, and it’s still showing that status. The problem is that when people filed their return, that refund is being held up for some kind of reason, and that’s the reason why they haven’t gotten it back as of yet.
So what would hold that refund up? What would actually cause that?
A lot of things. I think when I was on an IRS webinar, they said that there could be 20 different things that could hold up a return.
One of the new things for this year is paper-filed returns. So if you filed a return on paper, there may not be anybody in that processing office because of the furloughs to actually put your return through. So you may have to wait for a little while for that.
There might be errors, there might be matching errors. Sometimes the IRS—what they’ll do—is they’ll compare your return to the W-2 that’s filed by your employer, and sometimes that holds up the process. Also, states are doing matching things that may hold up the process.
Or it might be kind of what was happening a couple years ago, which is just identity theft or fraud.
Mostly just abnormalities are what’s holding up your refund from coming.
So how long might the refunds actually be held up?
That’s a good question, because it really depends on the circumstances. Like I said earlier, normally it was only a couple weeks, but with the furloughs, it’s definitely taking longer than it has in the past.
At that same seminar that I was at a couple weeks ago, the IRS had mentioned that they have over 10 million pieces of mail that still need to be processed. You know, there just wasn’t anybody there to process them. Ten million … that’s a ton!
So someone has to go through that mail, and someone has to be physically there to release a return that’s being held. You know, maybe a return is being held because it got caught up in the computer system, and normally somebody would be there to just check the box and let the return go through. Well, if those people aren’t there, the return is still being held up.
They said that whether we wanted to hear it or not, unfortunately, some of these refunds might be held up until September or October.
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