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After a three-month extension because of the pandemic, Tax Day is here.
July 15 marks the deadline for 2020’s extended tax season, and your last day to file—and pay—any 2019 federal income taxes owed. Whether you haven’t filed yet or did file your return but haven’t paid your balance, you need to take action today.
But don’t panic if you’re still unprepared: the IRS has options to further extend your filing deadline, plus payment plans available to those without enough cash to pay their balance in full by today’s deadline.
How to Take Action Today
First things first: If you are able to file and pay your taxes owed today, do.
Complete your tax return and submit payment online via the IRS’ Free File service, which is available to filers whose income was $69,000 or below. If you’re ineligible for Free File, use an online third-party service such as TurboTax or H&R Block. You can also submit your return by mail, as long as it’s postmarked by July 15.
But if you need more time to file, you can request a further extension from the IRS to delay your due date until Oct. 15. Anyone may apply for an automatic extension by filing Form 4868 through the IRS Free File Program today.
Keep in mind, this is a filing extension only. If you owe the IRS money, you’re still obligated to pay by July 15. Any taxes you owe after July 15 will be subject to interest, which accrues daily, as well as monthly penalties.
Learn more about penalties and interest on the IRS website.
Tax Day is the deadline for federal income taxes. Many states also extended their tax deadline to July 15, but check your individual state’s tax agency for more information on your state income tax obligation.
When you file your extension, you’ll need to include an estimate of your taxes owed on the form, which can help you determine the payment you should submit when filing. Use last year’s tax return, along with your W-2 and forms for other income sources (such as 1099s) to estimate.
This calculator from the IRS can help figure your total tax obligation using your pay statements most recent tax return. To determine what you still owe, subtract any amount you’ve already paid toward taxes.
And if you submit your estimated payment through IRS Direct Pay and indicate that the payment is for an extension, the IRS will automatically count your payment as an extension, even if you haven’t filed Form 4868.
If you don’t have the money to pay what you owe in full right now, any amount that you are able to contribute can help reduce the penalties and interest you’ll be charged in the future.
“If you are in a tough spot and don’t know if you’ll owe because you haven’t had a chance to get your documents together, the best thing to do is to file an extension with both the IRS and your state and make an extension payment—that way you’ll avoid penalties,” says Ally-Jane Ayers, CFP, co-founder and financial planner at Brooklyn FI.
For further flexibility, take time to apply for a short-term payment plan or long-term installment agreement with the IRS to spread your balance out over time with a lower monthly payment.
If you decide to use a payment plan, complete the application today. You can apply for a plan online and receive immediate notification of whether you’ve been approved.
Expecting a refund? You should still make sure your return is filed today. While you will receive your refund, prepare to be patient: The IRS is already facing processing delays due to an estimated backlog of millions of returns.
You should move quickly to file and pay your taxes owed by today’s deadline, but it’s important to approach your situation with a clear head and know the facts, Ayers says: “Stay calm and lean on the IRS website for help.”
Take time today to develop your action plan. Go ahead and file your return and pay online if you’re able; otherwise, file for an extension until Oct. 15, pay what you can of your estimated balance, and apply for a payment plan if necessary.