Our 2019 tax filing deadlines are just around the corner, so we are going to focus this week on some key reminders, including unique tax filing and payment deadlines that apply to this tax season, which may trip some of you, and potentially cost you unnecessary penalties and interest.
2019 Tax Filing Deadlines – IRS
In IR-2020-109 published on June 2nd the IRS reminded us that federal tax filing deadline had been postponed to July 15th.
Who does this deadline apply to?
- US individual taxpayers living in the USA
- Americans and green card holders living outside the USA
- Nonresident aliens with a 1040NR filing obligation (because they have taxable US income)
- Foreign entities with a US filing obligation (because they have US income)
Is there anything you can do if you need more time?
Yes! You can request an extension of time to file until October 15th, 2020 by filing Form 4868. Refer to the filing instructions on the form.
Federal Tax Payment Deadlines – DANGER: Three deadlines on the same date!
The US system is a PAY AS YOU GO tax system. This means that taxpayers are required to pay income tax as they earn it or receive it throughout the year.
These tax payments can be made either via employer tax withholding on wages or via estimated tax payments made directly by the taxpayer.
Withholding tax on wages is the responsibility of US employers. If you are a US taxpayer working in the USA, your employer would have asked you to complete Form W4 at the beginning of the tax year or at the beginning of your employment. Based on the information provided on that form, your employer withholds the relevant amount of federal, state and local income taxes. If this is your case, you are usually not required to make estimated tax payments.
When are you required to make estimated tax payments?
- When you are employed overseas by a foreign employer and expect to owe more than $1,000 in US income tax
- When you are self-employed either in the USA or a foreign country without a Totalization Agreement with the USA
- When you have income from US sources such as investment income, rental income, royalty income and other types of passive income and you expect to owe more than $1,000 in US income tax
- When your US employer withheld too little tax and you expect to owe more than $1,000
What are the estimated tax payment deadlines?
In a normal year, estimated taxes are due on April 15th, June 15th, September 15th and January 15th.
But this is not a normal year!
The first and second estimated tax payments were postponed to July 15th because of the coronavirus pandemic. This means that if you normally need to make estimated income tax payments, this July 15th you will need to make TWO of them.
A lot of us have been negatively impacted by the pandemic, with loss of income either due to a reduction in wages, loss of business income or loss of employment. Making our estimated tax payments will be harder than usual, and making two payments at once…..ouch! That’s going to hurt. If you are required to make estimated tax payments, you have 38 days to secure the cash necessary to make this payment.
But what about your 2019 tax balance?
What do you know? That’s due on July 15th also!
If your 2019 wage tax withholding or your estimated tax payments were insufficient, you are required to pay the tax balance owed by the tax return filing deadline, ie, July 15th.
Although it is possible to request an extension of time to file your tax return to October, the payment cannot be extended and the 2019 estimated tax balance is due on July 15th.
In summary, what federal tax payments are due on July 15th?
- Your 2019 tax balance
- Your first 2020 estimated tax payment
- Your second 2020 estimated tax payment
What about state income taxes?
If you thought the federal tax situation was a problem, this is even a bigger mess!
With respect to the filing deadline, most of them also postponed it to July 15th. Most of them. Not all them. To keep things interesting, there are exceptions. And these exceptions are devoid of what any reasonable human being would refer to as “rhyme or logic”.
These are the July 15th filing exceptions:
Mississippi: May 15th
Indiana: June 15th
Hawaii: July 20th
Iowa: July 31st
Colorado: October 15th
Virginia: November 2nd
About the state tax payment deadlines: Well…. Some of those are also different from the federal deadline, and do not even match the state filing deadlines…….because everyone knows that makes a lot of sense (not!). Here’s the list:
Mississippi: May 15th
Virginia: June 1st
Idaho: June 15th
Hawaii: July 20th
Iowa: July 31st
Are we done with this craziness? Nope! That would be too easy.
There are also exceptions to the 2020 estimated tax payment deadlines.
The following states have NOT extended their second estimated tax payments, and have a June 15th deadline:
AL, AZ, AR, DE, DC, IL, IA, KS, LA, MN, MT, NE, NH, NJ, NY, OR, OK, RI and VA.
If your head is spinning, don’t worry. You are not alone. Just check what payments apply to you from the list above, and mark them on your calendar. Needless to say, missing any of these payments could result in state penalties and interest.
Crossborder Academy Virtual Class for US Expats on June 18th at 17:00 CET
As a reminder, the Crossborder Academy is hosting a 2019 US tax season and coronavirus tax relief Open Virtual Classroom on June 18th. The session is tailored to Americans living in Switzerland, but all expats are welcome to participate.
Please register and send us your questions using the link below. Don’t forget to invite your friends.