June 1st is the new March 1st
(with thanks to Kay Bell, of Don't Mess With Taxes.)
As everyone knows, COVID-19 precautions by the Internal Revenue Service have pushed this year's Tax Day to July 15. That means June, whose start this week is around six weeks from the filing deadline, is essentially March as far as tax moves if you've yet to file.
Here are some things you need to consider if you have not filed yet. Even if you planned on filing for an extension to October 15, 2020 you need to consider the following.
1. Get your filing material in order. By now you definitely should have received all the official material needed to fill out your Form 1040. These include W-2 and 1099 forms, as well as all other tax documents that contain data you need to transfer to your tax return. Keep in mind that state tax filings are due on July 15th as well.
2. Calculate your combined estimated tax amounts. Among the tax duties that have been postponed are this year's estimated tax payments. The first quarter 1040-ES amount typically is due April 15. The second quarter's estimated payment has in normal tax times a June 15 due date. This year, both of those first two estimated tax payments for the 2020 tax year now aren't due until July 15. But you need to look now at what you must pay next month.
You can always go with the safe harbor option to pay as much (in most cases) as your prior year's tax bill. Or you can use the annualized income installment method, which allows for more flexibility in your 1040-ES payment amounts, but requires more paperwork. Either way, if you've been out of a job due to a COVID-19 layoff, it could affect your estimated payment amounts. Do the math now so you're not surprised in a month or so.
3. Don't forget about other taxable income. If you lost your regular, full-time job and were able to make up some of the money with side hustles, good for you. Remember, though, that these earnings are fully taxable income, even if you don't get any official paperwork detailing the money. While the IRS also is in a tough position due to added coronavirus burdens, you can be sure that it's going to be looking at gig workers' filings since so many more of us have transitioned to this type of work.
Also remember that if you got any unemployment benefits, those amounts are taxable, too. In this case, you'll get a Form 1099-G with the amounts that you must enter on your tax return next year. If you didn't have withholding taken from your unemployment payments, you'll need to count the money in calculating your 2020 estimated tax amounts.
4. Adjust your workplace benefits. If you still have a job and one that offers workplace benefits, changes to your personal financial situation due to COVID-19 may mean that health and child care choices you made during last fall's open enrollment period no longer apply. No worries. This IRS realizes this too, and has determined that such employees can have some flexibility.
The tax agency has announced that coronavirus-created unanticipated changes in the medical and dependent care needs mean that workers with such benefits can tweak them. For example, you're not paying as much as you anticipated for child care since you and your kids are now staying home together. Since you don't need as much as you originally allotted to your workplace dependent care flexible spending account (FSA), you can reduce that amount that's coming out of any pay you're still getting. The same adjustment option applies to employer-provided medical coverage and health FSAs.