Heads up to small business entrepreneurs, SBA and other emergency financing options may be more readily available to you with 2019 tax returns completed so you may want to get them done ASAP if you haven't already.
This is great advice--looking at it from that angle. To add to your advice, consider looking into the private sector for any potential help--interest forgiveness, loan consolidation, or even refinancing a home mortgage (get rid of the PMI, etc.). The private and public sector are two sides of the same coin for small biz entrepreneurs.
It's common-enough knowledge that the first thing any lender asks for will be copies of your 1040 or other forms for the most recent tax year.
You don't have to pay until July, but it's not bad advice to go ahead and file, if you think you may need documentation for 2019 personal or business income.
Many do and state tax policies often are intertwined with federal tax policies but each state has its own set of laws and policies, some of which will need to be changed if they want to match those of the IRS. The difficulty for some states is going to be that they're already tapping into their rainy day funds pretty heavily and unlike the federal government can't run deficits, so they could run into cash flow issues when delaying tax payments. Of course that's bound to happen eventually anyway as sales tax revenue plummets and the number of people who can't pay other taxes rises.
Fortunately the vast majority of folks who didn't fuck with their withholdings will usually have a refund. So the state would actually get to hold onto your money for longer.
It does, however, kind of neutralize the point of the stimulus bill to some extent because this encourages you to hold off getting your refund if you are in the phase-out region (75k to 99k) and your income went up in 2019. If you don't file before they send the checks, they use your 2018 number, so it's potentially better to not file until the last minute. Which means a couple hundred bucks per person that isn't out there stimulating the economy. Again, assuming an average person that didn't fuck with their withholdings.
The threshold is outright bad policy but god forbid congressional republicans just pass a stimulus without trying to own the libs in the high-cost-of-living blue states.
>own the libs in the high-cost-of-living blue states.
Wasn't it originally planned to go to everyone until Speaker Pelosi blocked it and said it must be means tested?
The refunds usually come within a couple days of submitting, if it's electronic. Longer if it's paper. State is usually within a week or two for my state, but may be different for yours.
Usually the other way around. You used to be able to deduct state taxes from your federal. Trumped changed that so that state deductions no longer apply.
A nice benefit of Roth IRAs is that you can remove your contributions (not profits) without penalty. You can always contribute it now, leave it in cash so it is liquid, and then withdraw it if necessary at a later date.
It will be liquid, but it will still have attributable gains if the account value increases. That amount will also need to be removed, which will come from previous contributions, before your actual tax deadline, which may be extended to October. Just a heads up.
This is incorrect. Withdrawals from Roth IRAs follow particular ordering rules and one can withdraw direct contributions without a 10% penalty or tax.
In general, direct contributions are taken out first, followed by conversions, followed by earnings. (For the exact rules, including more details on withdrawal ordering of conversions I'd recommend researching Roth IRA withdrawal ordering. Note that the rules for accounts like Roth 401k are different.)
Direct contributions are not subject to tax or penalty when withdrawn, so if one can always withdraw their total direct contributions without tax or penalty from a Roth IRA, while leaving earnings in the account. Withdrawing taxable portions of conversions or earnings may result in tax and/or a 10% penalty, depending on ones circumstances.
No, a Roth IRA is funded with post-tax money. A traditional IRA is funded with pre-tax money.
Once you reach the correct age, money coming out of a Roth IRA is not taxed. Money coming out of a traditional IRA is taxed.
As GP noted, contributions to a Roth IRA may be withdrawn at any time without penalty or taxes. The gains from those contributions follow different rules however.
E.g. Suppose you put in $1000 to a new Roth IRA account with no other contributions. Suppose the account is worth $1500 today. You may withdraw the $1000 you put in with no penalties or taxes leaving $500 in the account.
My point wasn't about withdrawal ordering. I'm not saying you can't withdraw the direct contributions first without penalty.
I'm saying, the law doesn't care that you left the part you over contributed uninvested, and that it was some other money in the account that grew.
I'm saying, to avoid penalty, you have to withdraw (direct contributions first) equal to [excess * (current value/value at date of excess contribution)].
This amount could be higher or lower than what you contributed, depending on how the existing Roth IRA investments in the account changed in value between the time of excess contribution and the withdrawal.
You're both correct but talking about different situations.
The original post is saying that some people may discover they've contributed too much to their IRA after doing the tax calculations (say, if they just contribute the max $6k now).
If this happens, you're subject to a 6% penalty unless you withdraw the excess along with "net attributable" earnings. These earnings are subject to the 10% early withdrawal penalty in addition to the normal income tax, and are calculated as a prorated portion of the entire IRA growth.
With the big, big caveat that this has tax implications if you have any other traditional IRAs. If you don't have t.IRAs — great, do it.
If you do have t.IRAs, you should read about "pro rata" and consider rolling your former t.IRA into a 401(k) (employer or individual) before making so-called backdoor Roth IRA contributions.
The IRA deadlines are automatically moved as well:
IRC 219(f)(3): Time when contributions deemed made.
For purposes of this section, a taxpayer shall be deemed to have made a contribution to an individual retirement plan on the last day of the preceding taxable year if the contribution is made on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (not including extensions thereof).
Well, I'm guessing there's more of an approval process for updating the IRS website or communicating there than they ... tolerate for tweets, but still, it does seem like too much of a lag, even by the standards of bureaucracy.
The workers who maintain the website likely are working from home and have a larger workload on them than normal. I could push changes out to my personal website in minutes but the IRS might have a complicated CMS with a long approval pipeline that takes time and coordination to work through.
www.irs.gov shows conflicting info - on the main page there's a link to "Coronavirus Tax Relief" page that has the new deadline on it. However, also on the main page there's a link to "File Your Tax Return" page that still says April 15th. Left hand and right hand?
Note that at the news release link, they have bolded payment. So, you still have to file by April 15, but if you owe, the payment is not due until July 15.
Edit: and now I see that the tweet re: filing was just this morning, so website change may be later today. But, do they want to do a production deploy on Friday? :)
> on the main page there's a link to "Coronavirus Tax Relief" page that has the new deadline on it.
No, it has the PAYMENT deadline extension on it, not the FILING deadline extension. As of writing this, it says, "Payment Deadline Extended to July 15, 2020".
Today's announcement is, as the HN title says, an extension of the filing deadline to match the already-extended payment deadline.
Does it really matter? As far as I know, you always got a six month filing extension just by asking. So the only thing that is of concern is the payment extension.
You should always keep a running estimated tax amount as an independent contractor and then keep that amount as either a buffer in your cash account or in a separate dedicated account.
I guess what I’m saying is that cash shouldn’t exist for you to use for anything else - the folks that that are expecting it have guns and their own courts and judges.
The penalties and interest for underpaying are quite reasonable and proportional, IMO (and the penalties are often waivable, making for only interest charges, which are very reasonable.)
If it’s a choice between eating and keeping your car/house and paying your taxes on time, choose the former every time!
Regardless, having the money needed to pay for last year's taxes sitting in the bank, equivalent to... a year or two of living expenses or so... and not having to empty it out as the world comes crashing down is kind of nice.
Ideally a financial instrument that pays a little bit of interest with security, but you can quickly access, so you can squeeze a little bit more out.
Money market accounts are a pretty easy yet secure option. I'm pretty sure there are better options considering my lack of investing knowledge and loophole manipulation.
Amazon's tax savants could probably give better advice, though they may not be as intricately familiar with tax code applicable to us peasants.
It probably won't affect them nearly as much as widespread shutdowns, social distancing, and mass COVID-19 casualties due to hospital shortages will.
I think it's useful to keep things in perspective - life in the United States is changing, and will be significantly altered for the next several months at least. My net worth on paper has fallen 30% this year, but right now there's exceedingly few places for me to spend money, so, there's that.
This is likely a godsend to H&R Block-style businesses. Many states are closing all non-essential businesses, and they would suffer quite a bit from having to close their doors a month before tax day.
With the deadline less than a month away, surely they have paperwork from some of their customers and can do those returns by April 15th. Then they can do another batch by July 15th.
401(k) deadlines are calendar year. Are you thinking of something like the Roth IRA, where the deadline for the earmarking of contributions for the previous year is April 15?
Form 4868 requires you to (on line 4) give an estimate of the taxes you will owe. The form's instructions say, "Make your estimate as accurate as you can with the information you have. If we later find that the estimate wasn’t reasonable, the extension will be null and void."
Because of the difficult situations many people face right now, it's helpful to have one less thing to worry about. Some people are sick, unemployed/furloughed, trying to save their business, healthcare workers working 80 hour weeks, away from home and unable to travel back, unable to meet with accountant, etc.
The threshold for finding of “unreasonable” is surprisingly lax in normal times. It’s no doubt going to be more lax now, especially if the discrepancy was remotely plausibly COVID-19 impacted (inability to use your normal preparer, access your mail, whatever).
I file the 4868 literally every year; I’ve never had any estimate even questioned, let alone overturned, despite sometimes being off by mid-high 5 figures (usually over, sometimes under).
The IRS seems content as long as you’re showing any reasonable intention to comply with your obligations. Everyone is afraid of them because of their power. That’s sensible. My experience (including two audits, one a TCMP audit) is that, while they move at government speed, they are quite reasonable and even helpful to deal with.
The reason for the reasonableness requirement is that in a normal year, you are required to pay that estimate on Apr 15 when you file the extension. If the estimate was too low, the IRS wants their pound of flesh.
In a year where no one has to pay until Jul 15, there is no point in enforcing that clause.
There is benefit to people in pushing the filing deadline even after the payment deadline has been changed as it does reduce the paperwork burden, especially for those who rely on paid preparers.
Many small businesses already had to file by March 16. And even if they filed for "extensions", payments of all taxes was due then.
Secretary Mnuchin wasn't telling the truth when he said "All taxpayers and businesses will have this additional time to file and make payments without interest or penalties."
I had to take a risk to visit CPA and prepare taxes by the March 16th deadline, and so did nearly every other small business in America.
(California has a payment deadline of December 31st for businesses!)
Thank god. My parents have a smallish accounting firm, and were so worried about still having to file. Things need to hold for that as well. The worry about employees coming in to the office and clients as well. They want to just close the office for two weeks and hold up with this all, as is the case everywhere.
Still though, they're both very worried about clients calling in and still expecting their taxes to be filed which cases like this have happened in the past. For example, one didn't want to come to their office, and said they should FedEx the filing already, which means someone is going to have to stand in line with others at a FedEx store, which is absolutely not something to be doing now, no matter how spaced out the line is.
This leaves the question of what they're supposed to do, because I'm sure there are clients with the attitude of this virus being overblown. And won't be happy if my parents come off as weak for not working. Obviously they should, but how much the client comes first is constantly an issue, especially now.
You can pre-pay and print Fedex labels on their site and then just drop the package at the nearest Fedex box of which there are typically many around major cities. Zero reason to wait in any kind of line.
> I'm sure there are clients with the attitude of this virus being overblown. And won't be happy if my parents come off as weak for not working.
I'm sure with everything going on there's some external thing they can point to; we're waiting for guidance from the IRS, our supplier is delayed because of this, etc. Or just be vague enough in your response that it could be for internal or external reasons.
Everyone here should be extremely nervous about the future of our country. Congress and the President are seriously considering helicopter money, which will ruin the dollar and send us into hyperinflation. It’s not rooted in reality. Who are we borrowing from? The surplus nations of the world will divert their surpluses domestically due to COVID-19, not by buying US treasuries and holding onto dollars. The only reason the dollar is going up is due to people trying to get out of dollar denominated assets.
If anyone here wants to get ahead of this, please at least consider buying silver. The dollar will become worthless.
I heard buying silver is _not_ a good investment and all of the current bailouts being distributed are not just cash handouts (unless we’re talking about the personal stimulus part), but loans to companies which will be paid back.
In 2008, all of the “bailouts” by the governments were loans that were paid back in full and the American people actually made a 50B profit, lowering inflation.
A lot of people, companies and countries have borrowed money in dollars and now with the downturn on stocks and other assets they have to sell their dollar denominated assets to pay back loans that come due in dollars.
Not sure why you're being downvoted. We have massive debt and our Federal Reserve is now resorting to buying treasuries again but in spite of that yields are rising! This should disturb everyone. Helicopter money won't necessarily cause hyperinflation but it will cause some inflation along with massive new debt.
Here's a reality check: MMT and related ideas are nonsensical. They cannot work. They will destroy economies where they are implemented.
I was really counting on launching a startup this year. It's R&D heavy, and the timing is (was) just right for product/market fit.
I bought a lot of equipment last year and started writing the software. I want to hire folks and do fundraising, but this seems like a really bad time for VC investment.
Could I get a small business loan in this environment? Are there any subsidies?
A small business loan is usually for traditional businesses with physical equipment that can be repossessed, or something like a doctor's office where the risks are fairly well understood. Is you physical equipment something that could be re-sold for some notable percentage of the purchase price?
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[ 2.9 ms ] story [ 168 ms ] threadYou don't have to pay until July, but it's not bad advice to go ahead and file, if you think you may need documentation for 2019 personal or business income.
It does, however, kind of neutralize the point of the stimulus bill to some extent because this encourages you to hold off getting your refund if you are in the phase-out region (75k to 99k) and your income went up in 2019. If you don't file before they send the checks, they use your 2018 number, so it's potentially better to not file until the last minute. Which means a couple hundred bucks per person that isn't out there stimulating the economy. Again, assuming an average person that didn't fuck with their withholdings.
The threshold is outright bad policy but god forbid congressional republicans just pass a stimulus without trying to own the libs in the high-cost-of-living blue states.
What if they file on April 15th? Do the refunds also come 3 months later? Would be bad PR given the circumstances if nothing else.
Kind of a big if for any retirement account right now unfortunately. But yeah, you would only pay a 10% early distribution penalty on any gains.
In general, direct contributions are taken out first, followed by conversions, followed by earnings. (For the exact rules, including more details on withdrawal ordering of conversions I'd recommend researching Roth IRA withdrawal ordering. Note that the rules for accounts like Roth 401k are different.)
Direct contributions are not subject to tax or penalty when withdrawn, so if one can always withdraw their total direct contributions without tax or penalty from a Roth IRA, while leaving earnings in the account. Withdrawing taxable portions of conversions or earnings may result in tax and/or a 10% penalty, depending on ones circumstances.
Once you reach the correct age, money coming out of a Roth IRA is not taxed. Money coming out of a traditional IRA is taxed.
As GP noted, contributions to a Roth IRA may be withdrawn at any time without penalty or taxes. The gains from those contributions follow different rules however.
E.g. Suppose you put in $1000 to a new Roth IRA account with no other contributions. Suppose the account is worth $1500 today. You may withdraw the $1000 you put in with no penalties or taxes leaving $500 in the account.
I'm saying, the law doesn't care that you left the part you over contributed uninvested, and that it was some other money in the account that grew.
I'm saying, to avoid penalty, you have to withdraw (direct contributions first) equal to [excess * (current value/value at date of excess contribution)].
This amount could be higher or lower than what you contributed, depending on how the existing Roth IRA investments in the account changed in value between the time of excess contribution and the withdrawal.
The original post is saying that some people may discover they've contributed too much to their IRA after doing the tax calculations (say, if they just contribute the max $6k now).
If this happens, you're subject to a 6% penalty unless you withdraw the excess along with "net attributable" earnings. These earnings are subject to the 10% early withdrawal penalty in addition to the normal income tax, and are calculated as a prorated portion of the entire IRA growth.
If you do have t.IRAs, you should read about "pro rata" and consider rolling your former t.IRA into a 401(k) (employer or individual) before making so-called backdoor Roth IRA contributions.
IRC 219(f)(3): Time when contributions deemed made.
For purposes of this section, a taxpayer shall be deemed to have made a contribution to an individual retirement plan on the last day of the preceding taxable year if the contribution is made on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (not including extensions thereof).
Crazy how these announcements are done via tweet. It would be nice to have something formal listed on their website.
Looking at their home page https://www.irs.gov it still says "File Your Tax Return - Tax deadline is April 15,2020".
Edit: Am I going crazy? The article used to say it was published on the 17th.
Edit: I could've sworn the article said it was published on the 17th. Now it says the 20th.
https://home.treasury.gov/news/press-releases/sm948
There's a link to that page from the IRS home page.
The filing deadline was just moved to July 15 two hours ago.
Edit: and now I see that the tweet re: filing was just this morning, so website change may be later today. But, do they want to do a production deploy on Friday? :)
No, it has the PAYMENT deadline extension on it, not the FILING deadline extension. As of writing this, it says, "Payment Deadline Extended to July 15, 2020".
Today's announcement is, as the HN title says, an extension of the filing deadline to match the already-extended payment deadline.
If it’s a choice between eating and keeping your car/house and paying your taxes on time, choose the former every time!
Money market accounts are a pretty easy yet secure option. I'm pretty sure there are better options considering my lack of investing knowledge and loophole manipulation.
Amazon's tax savants could probably give better advice, though they may not be as intricately familiar with tax code applicable to us peasants.
I think it's useful to keep things in perspective - life in the United States is changing, and will be significantly altered for the next several months at least. My net worth on paper has fallen 30% this year, but right now there's exceedingly few places for me to spend money, so, there's that.
With the deadline less than a month away, surely they have paperwork from some of their customers and can do those returns by April 15th. Then they can do another batch by July 15th.
https://www.irs.gov/newsroom/payment-deadline-extended-to-ju...
Form 4868.
Because of the difficult situations many people face right now, it's helpful to have one less thing to worry about. Some people are sick, unemployed/furloughed, trying to save their business, healthcare workers working 80 hour weeks, away from home and unable to travel back, unable to meet with accountant, etc.
I file the 4868 literally every year; I’ve never had any estimate even questioned, let alone overturned, despite sometimes being off by mid-high 5 figures (usually over, sometimes under).
The IRS seems content as long as you’re showing any reasonable intention to comply with your obligations. Everyone is afraid of them because of their power. That’s sensible. My experience (including two audits, one a TCMP audit) is that, while they move at government speed, they are quite reasonable and even helpful to deal with.
In a year where no one has to pay until Jul 15, there is no point in enforcing that clause.
There is benefit to people in pushing the filing deadline even after the payment deadline has been changed as it does reduce the paperwork burden, especially for those who rely on paid preparers.
Secretary Mnuchin wasn't telling the truth when he said "All taxpayers and businesses will have this additional time to file and make payments without interest or penalties."
I had to take a risk to visit CPA and prepare taxes by the March 16th deadline, and so did nearly every other small business in America.
(California has a payment deadline of December 31st for businesses!)
Still though, they're both very worried about clients calling in and still expecting their taxes to be filed which cases like this have happened in the past. For example, one didn't want to come to their office, and said they should FedEx the filing already, which means someone is going to have to stand in line with others at a FedEx store, which is absolutely not something to be doing now, no matter how spaced out the line is.
This leaves the question of what they're supposed to do, because I'm sure there are clients with the attitude of this virus being overblown. And won't be happy if my parents come off as weak for not working. Obviously they should, but how much the client comes first is constantly an issue, especially now.
I'm sure with everything going on there's some external thing they can point to; we're waiting for guidance from the IRS, our supplier is delayed because of this, etc. Or just be vague enough in your response that it could be for internal or external reasons.
It'll last certainly months, maybe a year (until vaccine found).
Accountants would be well advised to shift to all digital means, taking scans of documents etc.
If that is true, the lockdown is probably unnecessary in May, as the other nations aren't that far behind
If anyone here wants to get ahead of this, please at least consider buying silver. The dollar will become worthless.
In 2008, all of the “bailouts” by the governments were loans that were paid back in full and the American people actually made a 50B profit, lowering inflation.
Here's a reality check: MMT and related ideas are nonsensical. They cannot work. They will destroy economies where they are implemented.
I bought a lot of equipment last year and started writing the software. I want to hire folks and do fundraising, but this seems like a really bad time for VC investment.
Could I get a small business loan in this environment? Are there any subsidies?