The federal income tax filing deadline has been extended to July 15, 2020. Many states have extended the filing deadline as well. The extension relieves pressure and allows time to focus on the most important task of the day. I’m encouraging my clients and friends to file their taxes as soon as possible. Here’s why:
Easy to Gather Info
Do you have a (digital or physical) filing system that allows you to organize tax documents as you receive them? If so, congratulations! If not, then you’re like the millions of Americans who scurry about your home or office digging through piles of papers or sit at the computer for hours searching for emails that may contain the information your tax preparer has requested.
Whether it’s shorter commute times, a relaxed work schedule, or a partner who can contribute to chores because they’re now #WFH, miraculously, we’ve all been given the gift of more hours in a day. Use the time to gather the information necessary to file your 2019 taxes. You’re more likely to recall the details of specific transactions and to put your hands on documents you need now than you will be in three months, so go ahead and take care of the gathering and submission process now.
I am unaware of the number of people on the IRS staff and I am unsure of the system capacity for tax returns. However, I am certain that these the quantities are fixed. Last week I held for an hour and 54 minutes before the IRS telephone system told me that they wouldn’t be able to accept any more calls that day and I should call back the following business day. The tax return processing system works the same way. The more returns in the que, the longer it takes to process the return. File now before the system is overwhelmed.
If you’re due a refund, it will be processed more quickly if there are fewer people in line to receive funds. In fact, the IRS urges taxpayers who are due a refund to file as quickly as possible. File now and get your refund quickly.
Avoid Interest and Penalty
I encourage my small business clients to have a separate bank account for taxes. I recommend that they transfer a specific percentage of their monthly income into that account and that they make quarterly estimated payments to the federal and state government to cover their tax liability for the year. It’s great to establish the discipline of paying those taxes regularly, however, many of us don’t have a system in place for paying our tax liability and only begin strategizing when we’re specifically aware of the amount.
The sooner you file your taxes, the sooner you’re aware of your tax liability and the more time you have to pull those funds together to make a payment. Waiting until the extended July 15 deadline to file, may cause you to pay interest and penalties because you haven’t set aside enough money.
If you’re an employee and you do not have the proper amount withheld from your paycheck, the sooner you file your taxes, the sooner you’re aware of the adjustments that you need to make, and the sooner you can impact your 2020 withholdings. If you wait until July, the year is half over and you have to take greater efforts to correct the amount withheld from your paycheck.
Apply for Disaster Relief
The US Small Business Administration provides disaster loan assistance. Some private foundations are making grants available to small business owners most impacted by government mandated closings. Applications for these loans and grants will request your most recent tax filings and additional financial information. Filing now ensures that you have current information to submit with your application.
Across the country, state and local authorities are responding to current events with stay-at-home or shelter-in-place orders. I live in Virginia and today, the Governor announced a stay at home order effective through June 10. Please believe, as soon as the beach is open, I’m there! Honestly, we’re all going to want to resume our regularly scheduled activities as soon as we can. File your taxes now and get back to life just in time for summer.