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By now, every American taxpayer knows that the official IRS tax filing deadline for 2019 returns and tax payments has been pushed back to July 15. This unprecedented three-month extension was the government’s response to the sweeping economic impact of COVID-19, and for many, the postponement has been a much-needed gift. However, struggling businesses may still not be fully prepared to file their tax return by the new deadline.
For businesses that think they’ll need even more time this year, the IRS is still offering its usual option to apply for an additional three-month filing extension. Those who submit the appropriate IRS forms (Form 4868 for individuals and Form 7004 for businesses) will have until October 15 to file their 2019 tax return (and September 15 for businesses).
Depending on your business’s circumstances, taking steps to postpone your tax filing deadline beyond the automatic three-month extension could be a wise financial decision. Retroactive COVID-19 relief provisions, as well as asset depreciation bonuses, could work to your advantage if you wait to file your taxes.
Here are a few factors to consider as you determine whether you should apply for an additional extension on your 2019 taxes.
1. You don’t have all the information you need to file your business tax return yet.
While the IRS expects businesses to file and send any applicable 1099 forms by January 31, companies often request extensions on this filing deadline. With the coronavirus pandemic, these deadlines may have been pushed back even further, which means you may still be waiting on certain forms to complete your business or personal income tax return.
2. You have an opportunity to take advantage of tax relief provisions under the CARES Act.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was passed on March 27, 2020 to provide direct economic assistance to Americans, including small businesses. There are a few retroactive tax relief provisions that businesses may be able to leverage now before they file their 2019 income tax return, including:
Carrying back any business net operating loss (NOL) for tax years 2018, 2019, and 2020 up to five years, to recover some or all federal income tax paid in that year.
The option to claim a 100% first-year bonus precision for any real estate qualified improvement property (QIP) that was placed into service between 2018 and 2022.
A suspension of the excess business loss disallowance rule (i.e., loss exceeding $250,000 for individuals or $500,000 for married joint filers) for losses in tax years 2018, 2019, and 2020.
If any of these provisions apply to you, how you account for them on your 2019 tax return could greatly impact your future returns, and you may need more time to evaluate and decide. Now is the time to discuss CARES Act tax relief with your CPA, if you haven’t already.
3. You simply need more time to get organized and gather the required documentation for your taxes.
Businesses across all industries have been upended by the coronavirus pandemic, and in these challenging times, preparing for tax season might be the furthest thing from your mind. Many owners have been pivoting and adapting to keep their business and their families going through COVID-19, and perhaps have been directly impacted by the virus themselves. With so much in the air, it’s difficult to find the time to sort through your 2019 documents, reports, and receipts.
Fortunately, you don’t need to provide a reason to request a tax filing extension. The IRS automatically grants your extension as long as the proper form is filed on time.
How to obtain an extension to file your income tax return
Requesting an additional three-month extension to file your tax return is free and easy to do online. Simply visit the IRS website and download the appropriate application form as a PDF. As is the standard, you must submit this form to the IRS by or before the regular tax filing deadline (in this case, July 15) to qualify for an extension. Be sure to ask your tax professional if you need to file a separate extension form for your state income tax return as well.
It’s important to remember that this extension does not allow you to defer your tax payment due date — you must still pay any taxes owed, including your Q1 and Q2 estimated taxes, by July 15. However, you will gain an extra three months to take advantage of any retroactive tax relief policies before filing your 2019 return.
Not sure if requesting a tax filing extension is the right move for you? The experts at Miller & Company LLP can guide you through the process and help you determine the best tax strategy for your business, for this tax year and beyond. Contact us today for a consultation.
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