What to do if you have missed your Tax Extension deadline?

What to do if you have missed your Tax Extension deadline?

 Due to the poor economic conditions caused by the pandemic COVID-19, the US Government had extended the tax filing deadline for the Americans due on 15th April 2020 to 15th July 2020. However, millions of Americans have not been able to file their tax returns by the 15th of July 2020 and have filed for an extension. By this extension, the tax return filing deadline would be extended up to 15th October 2020 which has even passed now.

 So, if you have missed your extended tax return filing deadline then you might be wondering about certain factors.  Let us have a look at what are the common things to be considered if you have missed your extended tax filing deadline.

 Should you still file your tax returns if you have missed the extended deadline? 

Yes, even if you have missed your extended tax return filing deadline you must file your tax returns soon. You must fill your tax returns even if your income level was lower than the minimum income level set by the IRS i.e. $12,200 when you are filing your tax returns as a single individual and $24,400 in case if you are married and are filing your tax returns jointly for the year 2019. You must also file your tax returns even if you are eligible for availing credit like Earned Income Tax Credit. 

The sooner you are going to file your tax returns; the penalties you would pay for missing the extended tax deadline would be less.  

What would happen if you miss filing tax returns by the extended deadline? 

If you are going to obtain tax refunds from the IRS, then you would not be paying any penalty for missing your extended tax filing deadline. But, if you missed your extended tax deadline and have taxes due to pay to the IRS then you would have to pay penalties. Usually, this penalty is 5% of the tax that has not been paid and varies up to 25%. This penalty is calculated at the beginning of each month for which the tax has not been paid yet.

 Will a penalty be charged if you owe money to the IRS? 

If you owe money to the IRS, then there would be three types of penalties which you would have to pay. 

  • Failure-to-file penalty.

     This penalty would be charged if you are not able to file your tax returns on time. This failure to pay the penalty would be applicable for a full month or for a specific part of the month for which the return filing has been delayed. 

  • Failure-to-pay penalty.

    If you have not been able to pay your taxes to the IRS on time, then the IRS would impose a penalty. This penalty would be around 0.5% of the tax that is due to be paid to the IRS. 

  • Interest.Interest would be charged by the IRS if you are not able to file your tax returns on time or pay your taxes according to the due dates.
  • Will you still be paying penalties if miss the extended deadline due to financial hardships.

With the havoc created by the pandemic COVID-19, it is quite obvious for you to be facing economic hardships. However, if you can state the reasonable cause behind the inability to file tax returns or inability to pay your taxes your penalties might be relaxed.

  In case, you have been affected by the natural disaster which has been declared by the Federal Government then you would obtain relief while paying the taxes or filing the tax returns.

 So, even if you have missed your extended tax filing deadline you should not forget completely about filing tax returns.

Wondering how to get debt-free this year?

Wondering how to get debt-free this year?

This simple guide would help you!!

Repayment of debts can give you nightmares and this entire problem is a vicious circle. With one debt leading to another, the entire process can push you into financial troubles.

 So, it is essential to get rid of your debts soon; however, it seems to be a difficult thing if done without prior planning.

 Let us check out a simple guide which would help you to get debt-free this year.

  • The Essentials

 It’s a consumer world today and it’s the current trend to purchase new and fancy items. You might be having the best of clothes, apparel, and gadgets but you are interested in upgrading them. Expansion of your wardrobe has become a hobby and a passion too.

 Let’s think rationally and put an end to this. It is necessary that you prepare a list of the essential items and only purchase those which are needed. Avoiding unnecessary purchase is the best way to minimize your expenses thus, leading to less debt accumulation.

  • Budgeting and tracking your expenses

 Budgeting is highly essential to keep your finances under control. When you make a budget, know your expenses, and spend accordingly you would be able to save. These savings can be your savior while you are struggling to get rid of your debts. There are various budgeting tools and apps available that can be utilized to keep a check on your income and spending. When you are aware of your spending habit, you can easily find out those areas where you can cut off the spending. The cut-off spending would be used in paying off debts.

 

  • Search for shopping options which are cheaper

 When you are trying to have a debt-free life, it is essential to introduce some changes to your shopping options. You can resort to techniques like shopping in bulk. This would be less expensive. Moreover, for the general household shopping, you can plan to visit the stores once during the month. Your shopping list for essential items would help you in obtaining all the necessary items at once without the need for visiting the stores and also spending again and again.

 If you fill up your cupboards with the groceries, stationeries and other items when they are on sale and then skip shopping each month for at least 1-2 months, you would be able to save quite a good amount. The savings made can be utilized in making your debt payment then you would get rid of your debts in a considerable period.

 

  • Handle your credit card wisely

 You can consider your credit card as a source of cash that would be needed at times of emergency. But, if you are making improper use of your credit card you might be accumulating debts. You should ensure that your credit card is used only in times of emergency. Avoid making payments by using your credit card; rather plan the purchase of items only when you have cash with yourself.

 You should keep on checking the records of your credit card continuously. This would help you in keeping a track of how much debt you have to pay off. Moreover, you must be aware of any fraud schemes which can occur with your credit card.  Also, if you feel that the interest rates of your credit card are too high you can negotiate with your card issuer. If you have had a good history of paying your bills on time then you can expect getting a lower interest rate.

  • Make extra money

 If you decided to get rid of your debts this year, then you must find out other methods to increase your income. You can take up an extra job or work in extra shifts, putting all extra money earned into the debt payment. Once your debts are paid off, you can stop doing this extra work if it is painful for you. Moreover, you can rent out your extra space such as a garage, or room, etc. and use the extra income for paying off your debts.

 

  • Get rid of the expensive debts first

 This is one of the smartest methods to use for getting rid of the debts which you have. You must choose one of those debts of yours which are charging the highest interest. All the extra payments you can do must be focused on getting rid of this expensive debt first.

 Once your expensive debts are paid off, utilize all the money that you were paying for that particular debt in paying off the next expensive debt of yours. By continuing this method, you would be able to pay off all the debts and would be left with the least expensive ones only. You would feel motivated by using this strategy as it helps you in getting rid of the debts quickly.

 However, there is another strategy too i.e. the Snowball Method which is a variation of this method and is also helpful in getting rid of debts easily.

  • Refinancing

 The idea of refinancing your present debts would be of great help in paying off your debts. Several loans come up with attractive rates of interest. Getting that money and using it for paying off your debts would be a good strategy indeed. However, you need to be careful and consider the opportunities cautiously while refinancing.

  • Do not accumulate debts

 The golden rule to become debt-free is to prevent the accumulation of further debts. This process is a vicious circle and it needs to stop. One of the best methods by which you can keep a check on your debt accumulation is by the restricted use of your credit card. Moreover, spending wisely by minimizing your expenses is the best method to stop any further accumulation of debts.

 After you have stopped the further accumulation of debts, you can opt for the restructuring of your installments and payment strategy. By this, you would have a good financial strategy for your debt payment.

Conclusion

So, if you are interested in saving so that your debts are paid off you need to have a mindset change. You will have to think twice before shopping, make smart shopping decisions, and turn down temptations. With a substantial amount of self-control and discipline while dealing with finances you can easily get rid of your debts this year.

References

  1. https://blog.taxact.com/steps-to-become-debt-free/
  2. https://www.nomoredebts.org/blog/money/management/12-ways-to-get-out-of-debt
  3. https://www.thesimpledollar.com/credit/manage-debt/11-ways-to-get-out-of-debt-faster/
  4. https://www.aarp.org/money/credit-loans-debt/info-07-2013/10-steps-to-becoming-debtfree-in-less-than-a-year.html
Step-by-step guideline on what to do if you cannot afford to pay your taxes

Step-by-step guideline on what to do if you cannot afford to pay your taxes

Step-by-step guideline on what to do if you cannot afford to pay your taxes

 

 The IRS had extended the tax return filing and payment deadline until 15th July 2020 for the Americans to alleviate the financial crisis faced by millions of Americans due to the pandemic COVID-19. However, the pandemic has led to the unemployment of millions and millions of Americans. So, even with the extension in the return filing and tax payment deadlines, it is quite difficult for some Americans to pay their taxes on time.

The IRS has a simple reminder for the taxpayers who cannot pay their entire amount of federal taxes which they owe. They should file their tax returns on time and pay as much as possible. By this, the interest and penalties of taxpayers would reduce and there would not be much accumulation of interest to pay back.

If a taxpayer plans to pay his taxes as much as he can afford, then the IRS has some convenient methods to do this i.e. by IRS Direct Pay Method, Electronic Federal Tax Payment System (EFTPS), Electronic Funds Withdrawal, Debit or Credit card, or by Check/Money Order, etc.

However, for those taxpayers who feel payment of taxes are unaffordable at the moment; they can follow a detailed plan.

Step1 – File by the new 15th July deadline even if it feels difficult to afford the payment on time

As said earlier, due to the pandemic COVID-19 the deadline to pay the Federal taxes has been pushed to 15th July 2020. However, with this extra time, taxpayers should not wait much more to file their taxes. Taxpayers must consult tax professionals for filling the forms. By this, the credits and deductions to lower the bill can be found out easily.

Many taxpayers might consider the option of the deadline extension. However, the extension would provide more time for filing the tax returns but not for 

paying the taxes. Even if there is an extension, the tax payment must be done on time. So, an extension should only be filed by the taxpayers if due to some reason the taxpayer is not able to file the tax returns on time.

 Step2 – Pay as much as possible by the tax deadline

This is also recommended by the IRS that the taxpayers should wait till the deadline, try to arrange for the tax amount, and pay off as much as possible. Some taxpayers even prefer discarding some of their unwanted materials in exchange for cash which can be utilized in payment of their taxes which are due.

Taxpayers can contact the IRS on the toll-free number to discuss alternate payment options. IRS might help the defaulter taxpayers with other payment options like a short-term extension to pay the taxes, an

agreement for installment, an offer in compromise, or by temporary delay in the collection by reporting that the taxpayer’s account is currently not collectible until the taxpayers can afford to make the payment.

Step3 – Keep paying the taxes you owe even after filing

Even after Tax Day, taxpayers would have a period of around 1 month or 2 months before the IRS would contact them about the rest of the tax payment. During this available time of 1month or 2 months, taxpayers should try to pay out as much as possible to reduce the balance left out.

In case the taxpayers are not able to make their complete payment by this time, the IRS would suggest options for making the rest of the payments in monthly installments.

 

Step4 – Rectify the problem

You should approach a tax professional and try to work with him or his team to ensure that you are not stuck with the problem of unaffordability related to tax payments. This can be feasible either by setting aside profits from a side business or by the adjustment of withholdings from your paychecks.

Your issues can be best identified and rectified by the tax professionals so that these issues are avoided in the future.

Conclusion

Hence, you can follow these steps and try to pay off as much tax as you can. Avoiding the aggregation of penalties is important to avoid any further financial and economic hardships.

Top 10 things to keep in mind for your tax filing

Top 10 things to keep in mind for your tax filing

Top 10 things to keep in mind for your tax filing

Filing tax returns can be tricky, confusing and you ought to be cautious while filing your tax returns.

So, let us give you some basic tips to follow while filing your tax returns. These tips will help in avoiding common mistakes to ensure that your taxes are filed properly and you obtain the maximum refunds.

1.Filing for an extension

You can easily file for an extension in the timeline of your tax return filing but, an extension in the due date for tax payment cannot be done. You might have the thought that you may end up having taxes to pay once your return filing is completed. So, you should pay whatever amount you owe to the IRS by the July deadline so that you could do reconciliation after the returns have been filed successfully. If you do not pay your taxes by the deadline, you might have to pay a penalty which you should try to avoid.

2.Document your charitable contributions meticulously

Nowadays, charitable contributions are getting a lot of scrutiny from the IRS. So, if you are planning to claim charitable contributions as itemized deductions in your tax returns then you must have written acknowledgment from charitable organizations for contributions made of $250 or more. The contribution made can only be claimed if they are made to a qualified organization. In case of your contribution being less than $250, you must keep a list or record of what you contributed and to whom.

3.Know about new due dates for some tax returns

There might be some information forms that would be needed by you for filing your tax returns might be having different due dates than that of your tax returns. So, you need to be alert and visit the IRS’s website for the information on these new due dates.

4.Need for amendment

Many taxpayers have to file amended tax returns due to reasons like receipt of updated Forms 1099, Schedules K-1, and other information forms later than filing your actual tax returns. You need to be aware of the factor that if you are receiving any rectified information returns ad you have already filed your tax returns then you would not have to amend your returns if the difference is not more than $100 in your income or not more than $25 in your withholding. In these cases, your information and filing both would be considered as correct and no penalty would be charged.

5.Expiry of your ITIN

If you are using your ITIN for tax returns filing, then you must be careful about your ITIN being expired. If your ITIN has not being used for filing federal tax returns once within three years then your ITIN must have been expired and it needs to be renewed. You can renew your ITIN by submission of Form W-7 and the necessary documents as well. If you are filing your tax returns without a valid ITIN or without submitting a renewal application for your ITIN then there might be adjustments made into your tax returns. Your income tax return would be processed but you would not receive the refunds and any exemptions claimed on the income tax return would be denied to you.

6.Disaster losses

In case of any loss incurred in an area that has been federally declared disaster area, the losses can be claimed as an itemized deduction on your federal income tax returns. This loss must be related to your home, your vehicles, or any household items and the amount which you can deduct are reduced by any insurance payment which you have received or reduced by any salvage value of your property. These losses can be deducted on Schedule A of Form 1040 for the year in which the losses have occurred.

7.ID Theft

The tax season is the best season for identity thieves. You must be very vigilant and should try to keep your financial information secure. You should not send your financial information to a tax preparer by electronic medium if the medium is not encrypted. Moreover, you should be careful about phishing scams which can be in the form of fake email, text, or anonymous phone call.

8.Private debt collectors on the job

There has been a relative change in the IRS procedure i.e. the use of private debt collectors for certain federal bills that are overdue. If your tax debt is to be collected by debt collection agencies then you would be notified by a letter that confirms this. The collection agencies would send collectors who can be said as IRS contractors and any check you pay would be addressed to the IRS.

9.Query resolution with the IRS

Your queries on tax returns can be addressed by the Interactive Tax Assistant present on the IRS. This can be helpful for you in resolving your queries and thus, assisting you in filing your tax returns correctly.

10.Selection of your tax preparer

If you are planning to hire a tax preparer for preparation of your tax returns then you must obtain referrals, check the credentials of the tax preparers, interview them, and understand the method they use to bill, etc. These are the vital information that you must collect and you must check if they have a PTIN (IRS Preparer Tax Identification Number) or not which is mandated by the law. 

Conclusion

Hence, you can follow these tips and file your tax returns successfully on time without facing any inconvenience or difficulties.

Top #5 things to note about the extended Tax deadline July 15-2020 from April 15-2020 which is just round the corner

Top #5 things to note about the extended Tax deadline July 15-2020 from April 15-2020 which is just round the corner

Top #5 things to note about the extended Tax deadline July 15-2020 from April 15-2020 which is just round the corner

Millions and millions of Americans have been affected by the deadly coronavirus whose impact is worsening further day-by-day. Americans are facing health problems, losing their sources of income and are facing a very difficult time. In such bad times, the Federal Government has been quite supportive and has taken up various initiatives by which the economic stress of the Americans would be reduced.

One of the major initiatives taken by the Federal Government to reduce the economic burden on the Americans affected by the pandemic COVID-19 is the extension of the tax return filing and the tax payment deadline to 15th July 2020 by the IRS. This extension in tax filing deadline is applicable for all taxpayers i.e. both residents and non-residents and including individuals, corporations, estates, trusts, and other non-corporate tax filers as well. 

Let us know about the major five things about this tax deadline extension provided by the Federal Government.

a.Extension for filing tax return and tax payment

This extension offered by the IRS is applicable both for filing Federal tax return and Federal tax payment. Originally, the Federal Government was about to give the deadline until 15th July 2020 to pay the taxes along with penalties and interest. However, the rules have been modified due to the economic stress caused due to the pandemic COVID-19. But, those taxpayers who are expecting their tax returns must file them soon to obtain the refunds faster.

b.Eligibility for availing the extended deadline

According to the IRS, there are is no such eligibility criteria for a taxpayer to avail the extended deadline. Any person who has a pending Federal Income Tax payment or returns due for 15th April 2020 can avail of the relief of deadline extension. This extended timeline is also applicable for the estimated Federal Tax Income payment 2020. This timeline extension is only applicable for those payments or return filing due on 15th April 2020 and not due on any other date.

c.State tax laws

There are a large number of states who have also extended their timeline for Federal income tax return filing and payment dates to 15th July 2020 as that of the Federal Government. States such as Alabama, Arizona, Kansas, Ohio, South Carolina, District of Columbia, West Virginia, Michigan, New Jersey, Montana, Oklahoma, Minnesota, Kentucky, Wisconsin, Maine, Georgia, Illinois, California, Colorado, and many more have their tax return filing and payment extended up to 15th July 2020. 

However, there are some states like Hawaii, Idaho, Iowa, and Virginia which have extended their timelines differently than that of the Federal Government. The timeline in Hawaii has been extended to 20th July, in Idaho has been extended up to 15th June 2020, in Virginia had been extended up to 1st June 2020 and up to 31st July 2020 in Iowa.

d.Inability to pay by 15th July 2020

In case a taxpayer feels that he would not be able to pay his Federal Income tax even by the extended timeline i.e. 15th July 2020, then he would have to file for an automatic extension. The taxpayer must request for the automatic extension of the timeline by 15th July 2020. He can be able to request for the extension automatically by e-filing using Form-4868. Moreover, if business entities or trusts would be interested in filing for an extension, then it can be done electronically through the Form-7004.

 

e.IRA and HSA

 Since the deadline for filing tax returns and tax payment has been extended till 15th July 2020; the taxpayers can make contributions to their IRA and HSA up to 15th July 2020.

 

Additional Information

However, there are some other items whose deadlines have been extended until 15th July 2020. 

  1. The Estimated Federal Tax payment for the second quarter has also been extended till 15th July 2020 which was 15th June 2020 earlier. So, by this, the taxpayers would have to now submit both the Estimated Federal Tax payments for both the 1st quarter and the 2nd quarter by 15th July 2020.
  2. The partnership return filings and the corporate return filings have been extended till 15th July 2020.

Hence, the extended timeline for making the Federal tax payment, filing the Federal tax returns, and even payment of State Tax is almost round the corner and taxpayers should be prepared for it from now.

How can the pandemic affect my taxation as an NRI in the US?

How can the pandemic affect my taxation as an NRI in the US?

How can the pandemic affect my taxation as an NRI in the US?

The impact of the pandemic COVID-19 is on an increase across the entire world. Currently, more than 2 million people have been affected by COVID-19 out of which 1.7 lakhs have already died. taxation as an NRI in the United States has also experienced a very rapid spread of the coronavirus with the number of affected people being 7.5 lakhs approximately whereas the deaths due to COVID-19 have reached 40 thousand persons.

Not only the lives of the people in the US are being affected due to COVID-19, but there has also been a hugely adverse effect on the livelihoods of common people. Several businesses have closed down leading to many people including NRIs losing their jobs. However, the Federal Government has implemented several changes in the tax laws for the NRIs intending to reduce the stress in such troublesome times.

Changes in tax laws for NRIs

a.Deadline extension for filing tax returns

 The IRS and the US Treasury had declared that the deadline to file for individual federal income tax return has been extended to 15th July 2020. For this extension of 90 days provided by the IRS, there would not be any penalties charged by the IRS.

b.Deadline extension for tax payment

The deadline for making the federal income tax payment has also been pushed to 15th July 2020. This means if an NRI has tax to be paid this season then there is ample time to make the payments. For providing this extension in the timeline for tax payment, the IRS will not be charging any penalties. Moreover, this deadline extension is also applicable for the first quarter payment of estimated tax payments which were due on 15th April 2020.

c.No necessity for additional forms  

An NRI would not need to file for a tax extension to avail of the extended deadline for federal income tax return filing and federal income tax payment as well. However, if an NRI thinks that he would not be able to file the tax returns or pay the taxes even after 3 months then he would have to file for an extension by 15th July 2020.

d.Deadline extension for quarterly estimated tax payment

 For the self-employed NRIs who had their quarterly estimated tax payment due on 15th April 2020 and 15th, June 2020 would obtain an extension for the payment till 15th July 2020.

 

e.Changes in the deadlines for payment of State Tax

In general, the deadlines for filing federal tax returns and payment of federal tax are different from that of the State tax. However, due to the outbreak of COVID-19 the deadlines for Federal tax returns and tax payment had been extended. Most of the States have aligned their tax payment deadlines with that of the new Federal deadline. Some states have defined their guidelines for the payment of tax and deadlines. Complete information on the State tax-related changes and deadlines can be obtained from the respective State tax agencies.

f.Deadline extension for contributions to be made into IRA, HSA, and MSA

 Along with the extension in the deadline of Federal taxes, there has been an extension in the deadlines for making contributions to the IRA, HSA, and MSA. The deadline for contributing to the IRA, HSA, and MSA has been extended to 15th July 2020. However, in the case of IRA, the NRI must ensure that when he is making the additional contribution towards the IRA the custodian should earmark the additional contribution for the year 2019 and not consider it as 2020 return.

 

g.Stimulus Payments

Under the Coronavirus Aid Relief and Economic Security (CARES) Act, the Federal Government has announced the process of one-time payments to be sent in the form of Stimulus payments. These Stimulus payments would mainly depend on the filing of tax returns for 2019 and the Adjusted Gross Income (AGI) of an NRI.

NRIs filing tax returns as single filers and having an AGI below $75,000 would obtain $1200 as Stimulus payment. When the AGI is above $75,000 then the amount obtained reduces by $5 for every $100 increase in the AGI above $75,000. NRIs filing tax returns jointly as married couples and having an AGI below $150,000 would receive $2400 as Stimulus payment. If the AGI exceeds $150,000 then the Stimulus payment received would reduce by $5 for every $100 increase in the AGI above $150,000. In both cases, an additional $500 can be obtained if the filer claims a dependent below the age of 17 years.

However, along with these changes being implemented in the tax laws, the IRS is also processing the tax returns according to the normal procedures. So, it is advisable for the NRIs also to file their tax returns soon if they have not done it yet and obtain their refunds.