July 15 Tax Deadlines: Deadlines to File, Deadlines to Pay

Tax Returns and Tax Payments are Due on or Before July 15, 2020. So, with July 15th fast approaching, it is important to understand that the day is more than just the deadline for filing your 2019 tax return. It is also the deadline for payment of your 2019 taxes, 2020 estimated tax payments, and the deadline to make contributions to your IRA for tax year 2019:

  • Return Extension Those who are unable to file their 2019 individual 1040 tax return by the July 15th deadline need to file a Form 4868 extension, which will give until October 15th to file the return. The tax liability shown on the extension should be paid with the extension form to avoid late payment penalties and interest. Penalties, interest, or additions to tax for failure to pay federal income taxes were disregarded during the April 15–to–July 15 extension-period window, but these will begin to accrue on July 16, 2020.

    CAUTION: While the Form 4868 extension is an extension for filing, it is not an extension for paying your tax liability. The Form 4868 instructions say (and tax courts have ruled) that for an extension to be valid, a taxpayer must properly estimate their tax liability, enter that tax liability on the form, and file the extension by the due date of the return, which is July 15th this year.

    Federal Payment: https://www.irs.gov/forms-pubs/extension-of-time-to-file-your-tax-return
    State of California: https://www.ftb.ca.gov/pay/index.html

    The maximum cumulative penalty rate is 25%; however, the ½ percent per month for late payment continues until the tax is paid. There is also a minimum penalty which is the lesser of $435 or the amount due on the 2019 tax return.

    The IRS also charges interest on late payments and penalties. The rate is subject to quarterly adjustment and is currently at an annual rate of 5% of the amount owed, with interest accumulating daily.

  • Contributions to a Roth or Traditional IRA for the 2019 Tax Year July 15th is the last day for making 2019 contributions to Roth or traditional IRAs. Form 4868 does not provide an extension for making IRA contributions.
  • Individual Estimated Tax Payments for the First Two Quarters of 2020 Normally, the first installment of estimated taxes for a tax year is due on April 15th, and the second installment comes due on June 15th. For 2020, the IRS extended these due dates to July 15th, to coincide with the other COVID-19-related extensions. Taxpayers who fail to prepay the minimum (“safe harbor”) amount may be subject to a penalty for underpayment of the estimated tax. This penalty is based on the interest on the underpayment, which is calculated using the short-term federal rate plus 3 percentage points. The penalty is computed on a quarter-by-quarter basis, so even people who have prepaid the correct overall amount for the year may be subject to the penalty if the amounts are not paid proportionally or in a timely way.

    Estimated Tax Payments: two options exist for safe-harbor prepayments:

    1. The first is based on the total tax on the current year’s return. There is no penalty when prepayments (including both withholding and estimated payments) equal or exceed 90% of the current year’s tax.

    2. The second is based on the total tax amount (not including credits for prepayments) on the return for the preceding tax year. This is generally set at 100% of the prior year’s tax liability. However, taxpayers with adjusted gross income exceeding $150,000 (or $75,000 for married taxpayers filing separately) must pay 110% of the prior year’s tax liability to meet the safe-harbor test.

    Pay Estimated Taxes Online:
    Federal: https://www.irs.gov/payments
    State of California: https://www.ftb.ca.gov/pay/estimated-tax-payments.html

We’re Here To Help!

We are here to assist you with any questions or concerns. For instance if you can’t pay your taxes, please do not hesitate to call the office at 415-394-7200, 888-829-3325, or email us.

We hope you had a happy and safe Independence Day!

Stay safe,
Moskowitz LLP, A Tax Law Firm

Disclaimer: This information is not a comprehensive list of all tax deadlines due July 15th. Consult with your tax advisor for specific information.