It’s officially summer. Time to kick back and relax by the pool, right?
Not so fast.
Remember back in spring? You know, when coronavirus was rocking our world even more than it is now?
As an acknowledgement of the pandemic’s disruption of business nationwide, the IRS extended most April, May, and June tax deadlines to July 15 instead. That may have seemed like eons away back then, but that deadline is upon us.
So if you’re a small business owner, it’s past time to focus on your federal taxes, if you haven’t already. Don’t count on Uncle Sam to move the deadline again – that shows no sign of happening.
Implications for 2019 and 2020 Taxes
July 15 looms large on two fronts:
- 2019 federal taxes–The filing and payment deadline for 2019 personal income tax returns was extended from April 15 to July 15. (See the latest guidance from the IRS here.) If you are a sole proprietor whose business taxes “pass through” to your personal taxes, that means your 2019 business numbers need to be pulled together by this deadline as well.
Won’t be ready in time? You can apply for a free filing deadline extension, giving you until October 15 to file. But, if you owe for 2019, your payment deadline remains July 15, 2020. Consult with your tax advisor about the implications in your particular circumstances.
Also worth noting: A SEP (Simplified Employee Pension) IRA is a retirement savings account for self-employed individuals. If you have a SEP IRA, you can make a retroactive contribution (to the extent allowed by law) for the previous tax year. Normally, that deadline is April 15, coinciding with the federal tax filing deadline. This year, you can make a retroactive SEP contribution for 2019 by July 15, instead of April 15. That deadline has been extended to coincide with the coronavirus-delayed 2019 filing deadline.
- 2020 federal taxes–If you’re self-employed, you may make estimated federal quarterly tax payments using form 1040-ES. This year, because of COVID-19, the Q1 and Q2 deadlines for those estimated payments (formerly April 15 and June 15, respectively) have been extended to July 15. Said differently, the estimated federal tax for the first half of 2020 for your business is due by July 15. Learn more at this IRS page.
Of course, if you’re like most people, your business income took a hit in the first and second quarters of 2020. That may mean that you owe considerably less in estimated tax payments for those quarters, since what you owe is a function of what you brought in.
Don’t Forget State and Local Obligations
Of course, federal taxes are only part of the picture. Don’t forget any state or local taxes you may owe.
Those deadlines may have moved too. At least some states moved their tax due dates to align with the delayed federal deadlines.
Nobody’s Favorite Chore
Paying taxes isn’t high on anyone’s list, even in normal times. And in mid-2020, it’s just another hassle, after a parade of them.
Still, check this box by July 15, and you can get back to enjoying a refreshment by the pool. Here’s to enjoying the second half of your summer!
This is provided for informational purposes only, and should not be construed as legal or tax advice. Consult with your tax advisor regarding tax decisions.