This time of year, many Americans would normally be scrambling to finish their taxes and get them mailed off just in the nick of time. But this year is not like other years. This year, millions of Americans are at home, sheltering in place, and avoiding contact with the outside. And millions of other Americans are bravely and carefully going to work so that the rest of us can survive. Brave Americans from healthcare professionals to delivery workers are doing their part so that the rest of us can stay healthy and safe at home. This year is not like other years, and that’s why the IRS has done something just as unprecedented as the times we are living in. The IRS has moved tax day three months into the future. Tax day this year will not be April 15, as usual. Taxes for 2019 are now due by July 15, 2020.
Who You Should Wait
If you have a lot of taxes to pay and money is tight right now, it makes sense to wait. This is especially true for businesses and business owners. The US government estimates that delaying tax day until July 15 will allow about $300 billion to remain in the economy. Right now, with consumer spending down and business income plummeting, keeping money in the economy is crucial.
Even if you plan to wait, you should collect your tax documents now. By July 2020, it may be more difficult to find all of the receipts, forms, and other materials you need to file your taxes. For businesses, this is especially important. Most businesses use an in-house or external tax preparer, and they will need all of your documents before they can prepare your taxes.
Who Shouldn’t Wait
Most individuals, especially those who are employed by a company or business and receive a W-2, do not end up owing taxes. Instead, millions of Americans look forward every year to a tax refund. If you expect to receive a refund, there is no reason to wait. The IRS has already issued millions of refunds and will continue to do so despite the change in the filing deadline.
Right now, many Americans are struggling to make ends meet. Unemployment applications have skyrocketed, and they are overwhelming state-run agencies and systems. In many cases, state unemployment agencies are working with equipment and systems that are decades old and were never meant to handle such a sudden spike in applications.
Until just a few weeks ago, unemployment was at historic lows. In the week that ended February 22, 2020, just over 200,000 people applied for unemployment in the entire country. In the last week of March, that number jumped to nearly 7 million jobless claims. For any business, increasing your workload by over 3000% over a period of just a couple of weeks would break down any systems you had in place. So millions of Americans are losing their jobs and also struggling to file for unemployment.
One area of government that is not overwhelmed is the IRS. The IRS processes about the same number of refunds every year. So if you expect a tax refund, that may be one of the most reliable ways to get some extra cash right now.
Check When Your State Tax Is Due
While the federal government and the IRS have moved back tax day, not all states have done the same. Many state and local governments have made changes and allowances with their tax collections. However, putting off tax day has a different effect on states that it does on the federal government.
States rely on tax dollars to fund their governments. While this is technically true of the federal government, as well, the federal government also relies on borrowing for much of its spending. State governments can borrow some, but not nearly to the same extent as the federal government. What that means is that state governments may run into real cash flow issues if they postpone their tax collection.
Unfortunately, not all states have implemented the same policies. Tax dates vary across the 50 states and US territories. You can find a detailed list of state and territory tax guidelines here, compiled by the American Institute of Certified Public Accountants.
What This Means for Tax Preparers
Many Americans and most businesses hire someone to prepare their taxes. To do that, you need to gather all of the relevant documents and get them to the tax preparer in time to file before the deadline. This time of year is usually extremely busy for tax preparers as everyone struggles to make the deadline. With the shifted timeline, tax preparers can breathe a little easier, knowing that they have more time to get it all done.
But like many Americans, your tax preparer is very likely working from home, with all of the stresses and inefficiencies that entails. Be patient with your tax preparer, and don’t wait until right before the July 15 deadline to hand over your documents. Expect service to be a little slower this year, and make allowances for the extra processing time.
Overall, the extended deadline for taxes will be a relief for many individuals and businesses. And if all goes as planned, it will leave hundreds of billions of dollars of tax money in the economy—for now. The money is still due, and taxes that don’t meet the extended deadline will be subject to the same fines and interest as any year. So file now if you expect a refund, and feel free to take a little extra time if you owe. Just not too much time.