IRS extends the 2020 tax payment deadline to July 15
In short, the IRS extends the 2020 tax payment deadline to July 15 in response to the coronavirus. However, this relief applies to payments only. In other words, the filing period for returns still closes on April 15.
How the IRS extends the 2020 tax payment deadline to July 15
- First, income tax and self-employment tax payments move from April 15 to July 15, without interest or penalty.
- In addition, corporations may defer up to $10,000,000 per filing. This limit assumes a C corporation that does not file as part of a consolidated group.
- For individuals, the deferral limit is $1,000,000, whether they file as single or married. The same limit applies to other taxpayers, such as trusts.
- Finally, taxpayers must pay any amount above these limits by April 15, or they may incur penalties and interest.
Of course, the initial announcement covers only returns due before April 15. The IRS may issue further changes for returns that fall due after that date. Meanwhile, readers should note that later IRS guidance changed several of these terms. Therefore, please confirm the current rules with the IRS or your accountant before acting.
What the payment deferral means in practice
In practice, the change gives many households and businesses extra time to manage cash. For example, a self-employed consultant who expected to send a large payment in April can keep those funds available for three more months. As a result, the consultant can cover rent, payroll, or other near-term costs while conditions remain uncertain. However, the tax itself does not disappear. Instead, the same amount remains due on the new date, so it helps to set the money aside now.
Keep in mind that the deferral and the filing deadline are separate. In other words, you still need to submit your return by April 15 under the initial announcement, even if you plan to pay later. Most importantly, a complete return gives you and your accountant a clear picture of what you owe before July arrives.
Steps to take before April 15
- First, gather your income records and estimate your total tax for the year.
- Next, compare that estimate with the deferral limit that applies to you.
- In addition, plan how you will pay any amount above the limit by April 15.
- Finally, mark July 15 on your calendar and reserve the deferred amount in a separate account.
Why the timing matters for cash flow
Fortunately, the news that the IRS extends the 2020 tax payment deadline to July 15 gives many taxpayers breathing room during a difficult period. Above all, it lets you keep liquidity while income remains unpredictable. However, deferring a payment is different from reducing it. As a result, a sensible plan treats the deferred tax as money already spent. For example, you might move it into a savings account that you do not touch for other purposes.
Questions to raise with your accountant
A short conversation with a tax professional can prevent costly mistakes. For instance, you may want to ask whether your situation falls under the individual or the corporate limit. You may also ask how the deferral interacts with your other obligations. Meanwhile, business owners should confirm whether their entity files as part of a consolidated group, since the $10,000,000 limit assumes it does not.
Of course, every situation differs. Therefore, treat this summary as a starting point rather than a final answer. Next, bring your prior-year return and your current estimates to the meeting. In addition, ask how any later IRS guidance affects the dates in this article.
Activest Wealth Management is not a tax advisor. For guidance on your situation, we suggest contacting your accountant. Alternatively, let us know, and we can introduce you to a specialized accountant.
The official announcement is available on the IRS newsroom.
