Updated with the latest IRS clarifications.
In the midst of this crisis, taxes may not be the first thing on your mind. And, at a time like this, that’s understandable. Coronavirus has had a global impact that is unlike anything we have seen before. Each and every one of us across the world has been impacted by it.
During this time, we hope to be a support and voice of clarity and calm for our clients and followers. At Online Taxman, we are all expats. We know the unique challenges of being an expat at a time like this. Our team is here to help in whatever way we can.
Below we give a summary of the deadline extension and answer key questions. We also updated our 2020 tax due dates post.
The IRS continues to provide updates. This IRS notice clarified a few things regarding information returns, estimated payments and amended returns. We will continue to share tax updates here on our blog and on our LinkedIn and Facebook pages.
Tax deadline extension due to the coronavirus crisis
As you may have seen, the IRS recently took action to ease the financial impact of COVID-19. The details of the tax relief have been developing over the last week or so. There is now an automatic extension for the payment and filing of taxes. This extension will give US taxpayers an extra 90 days to file and pay taxes.
Below, we answer 11 key expat questions and concerns about the extension.
1. Which deadlines are extended?
To reduce the impact of the COVID-19, the IRS is giving a 90-day extension from April 15, 2020, to file returns and to make tax payments. This means that the new deadline to file tax returns and make tax payments is now July 15, 2020, instead of April 15, 2020.
Originally, only certain due dates were extended. The latest update, however, extended basically all filing and payment deadlines that originally fell between April 1, 2020 and July 15, 2020, to July 15, 2020.
Nonetheless, our team still recommends that individuals who are eligible for a refund file their taxes as soon as possible.
2. Does the extension apply to expats and non-resident, too?
Yes. It applies to expats and non-residents, as well as US residents. Expats usually get an automatic extension to file until June 15 but interest for owed taxes started accruing on April 15. With this tax relief, expats have time until July 15, 2020, to file and pay. No interest or other penalties are due.
Of course, anyone who still needs more time to file can request an extra extension to October 15. Nonetheless, to avoid penalties and interest expats should make a tax payment before July 15.
3. Who is eligible for the extension?
Anyone who files a 2019 federal tax return on April 15 is eligible. That includes individual taxpayers, corporations, trusts, estates, and unincorporated business entities.
An earlier notice had limited the extension to individual taxpayers that owe up to $1 million and to corporations that owe up to $10 million on their taxes in 2019. A later IRS notice, however, makes this extension available, regardless of the amount owed.
4. Do I have to be personally affected by COVID-19 to qualify?
No. Anyone who must file a 2019 federal tax return is eligible. Taxpayers don’t have to be sick, quarantined or otherwise directly affected by the coronavirus in order to qualify for this tax extension.
5. Does this extension apply to all tax payments?
Initially, there were some exceptions. The IRS notice from April 9, 2020, however, expanded the relief to additional returns and tax payments. Trust, estate, corporate and non-corporate returns that were originally excluded from the extension now also qualify for the extra time.
Basically, all federal income tax, estimated tax payments, and installment payments that were due before July 15 receive the July 15, 2020 extension. This includes section 965 installment payments that were originally due on April 15, 2020. It also includes estimated payments of self-employment tax.
This means that anyone, including Americans abroad, now have until July 15 to file their 2019 federal income tax return and pay any tax due.
6. Will I owe interest or penalties if I wait to pay?
As long as you pay by July 15, 2020, then there will not be any penalties or interest. After July 15, interest and penalties will start on any unpaid taxes.
7. How do I request the extension?
The extension is automatic. No need to file any extra forms.
8. What if I’m not ready to file by July 15?
If you still need more time beyond the granted federal tax relief, you can request an extension to October 15, 2020. (Some expats may need the extra time to qualify for the Foreign Earned Income Exclusion.)
At the current time, we assume that interest and other penalties start on July 15, 2020. Therefore, we encourage you to make an estimated payment by July 15 to avoid penalties.
9. Does the extension apply to my state taxes?
The extension announced by the IRS is only for federal taxes. Each state sets its own tax deadlines. Expats need to keep in mind that some states still require them to file state tax returns, even when they live abroad.
Some states, such as California, had already announced extensions before the federal notice was published. They may adjust their extensions to align with the federal COVID-19 tax deadline extension.
For the latest info for each state, please check here.
10. Is there an extension for IRA contributions?
Yes. Normally, IRA contribution for the prior year must be made by April 15. The IRS tax relief due to the Coronavirus extended this deadline as well to July 15, 2020.
11. Where do I find more information about the COVID-19 tax relief?
The news on the tax relief has been changing quickly over the last few days. We will continue to update this post as we get more information or anything changes. We cannot guarantee though that all information here is absolutely correct at all times, especially in a quickly evolving situation like this. Please consult a tax professional.
In addition, the IRS published a FAQ about the tax relief.
Getting expert help with your taxes – Online
As an online firm, we are working diligently through the tax season. If you want to use the stay-at-home time to get your tax documents together and your return started despite the pushback in deadlines, we are working full time. If you haven’t worked with us before, you can schedule a consultation here. (Current clients, please contact your accountant directly.)
Please also follow our social media and sign up for our newsletter. We will post updates and explanations there, especially as they may affect expats and international taxpayers.