As the July 15th tax filing and payment deadline approaches, there are a few important reminders relating to tax law changes brought about by the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) to be aware of.
Know the Revised Tax Filing and Payment Deadlines
| Traditional Due Date | 2020 Due Date Extended by the CARES Act |
|
| January 1 – March 31 Estimated Tax Payment |
April 15 | July 15 |
| April 1 – May 31 Estimated Tax Payment |
June 15 | July 15 |
| June 1 – August 31 Estimated Tax Payment | September 15 | September 15 |
| Individual and Corporate Tax Returns and Payments | April 15 | July 15 |
Consider Last-Minute Ways to Reduce Taxes
First, if you have not already contributed the maximum amount possible to your IRA, you can still make a contribution that reduces your 2019 taxable income as long as you make that contribution before the extended July 15th tax filing date. As a reminder, for 2019, you can contribute up to the lesser of your 2019 earned income or $6,000 ($7,000 if age 50 or older in 2019).
Second, if you had a health savings account (“HSA” – a tax-free savings account to save money for medical expenses when you are enrolled in a qualified high deductible health care plan) in place in 2019 and have not already contributed, you have until July 15th to make a contribution. As a reminder, for 2019, the maximum contribution for single participants is $3,500 and $7,000 if the HSA covers your family ($4,000 and $8,000 if you or any HSA insured person was 55 or older in 2019). Note that these contribution limits include employer contributions.
Third, if you are a business owner that operates as a sole proprietor or are self-employed, you can contribute the lesser of 20% (25% for corporations) of 2019 net income or compensation or $56,000 to a SEP IRA in 2020. Even if you have not already opened the SEP IRA account, you have until the new tax filing deadline of July 15th, 2020 (or up to October 15th, 2020 if you file an extension) to make a deductible contribution.
If You Own a Business, Consider Whether Net Operating Losses (“NOL”) Might Provide You a Refund
While NOL carryback rules were eliminated in 2017, the CARES Act allows net operating losses occurring in 2018, 2019, and 2020 to offset taxable income up to five years prior. Additionally, the CARES Act suspends the 80% of taxable income limitation for tax years before 2021. For tax years 2018, 2019 and 2020, NOLs may fully offset taxable income in any year up to five years prior to 2018, 2019 or 2020. Speak with your tax advisor soon to see if these NOL changes will justify an amended return to potentially save on taxes. The deadline for amending a return for an NOL incurred in 2018 is June 30, 2020. More information on NOL changes may be viewed here.
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