2020 Tax Filing Deadline

The Treasury has issued guidance that clears up questions regarding the 2020 tax filing deadline.
The Treasury has issued guidance that clears up questions regarding the 2020 tax filing deadline.

As we continue to battle the effects of the COVID-19 pandemic, rumors have gone around that the 2020 tax filing deadline may be delayed. We now have the final word from the US Treasury Department on the subject.

The Treasury Department issued guidance on March 18th saying that taxpayers can delay paying some federal income taxes for 90 days but still must submit their tax return forms to the Internal Revenue Service — or officially request an extension — by April 15.

Individuals can delay payments of up to $1 million in taxes and corporations can get payments of up to $10 million deferred until July 15 without interest and penalties, according to a Notice published Wednesday.

The guidance clarifies and expands on US Treasury Secretary’s announcement Tuesday that businesses and individuals can delay some tax payments, which left some taxpayers confused about whether they still must file a return by the April deadline and how the payment extension would affect their specific situations.

“This guidance does not change the April 15 filing deadline,” according to the statement.

In addition, the notice extends the payment deadline for the self-employed individuals and business owners by 90 days for quarterly estimated taxes, which are also due on April 15.

James Russell, PLLC is committed to continuing to meet the needs and service expectations of our clients. Our Lynnwood office is currently open during normal operating hours.  And as the well-being of our clients and our team are top priority, we offer several electronic options available during this tax season.  If you have any questions about the 2020 tax filing deadline, or any other tax season questions, contact your James Russell advisor for assistance.

Potential IRS Delay of Tax Filing Season

The Novel Coronavirus Continues to Have Far-Reaching Effects
The Novel Coronavirus Continues to Have Far-Reaching Effects

The global effects of the corona virus pandemic are far-reaching, for businesses around the world and of course for local businesses in the Seattle area. James Russell PLLC is committed to helping our clients during this uncertain time. One of the first effects that we are anticipating is an adjustment of federal tax deadlines. It is expected the Treasury Department and the IRS will announce this week an extension of the April 15th tax deadline by as much as 90 days and include a waiver of penalties and interest for most taxpayers.

The Treasury and IRS are very much aware that March 16th is the tax deadline for most businesses.  They have indicated they will be generous in determine reasonable cause abatement of any penalties for taxpayers and tax preparers unable to file in a timely manner.

In a letter sent to IRS Commissioner Charles Rettig on Friday, the Reps. Josh Gottheimer (D-N.J.) and Paul Mitchell (R-Mich.)  argued that additional time should be provided to help mitigate the impact the virus is having on local communities.

“We are writing today to request that the Internal Revenue Service (IRS) extend the deadline for tax filings for individual and business filers by ninety days, from the current date of April 15, 2020, until June 15, 2020,” they wrote. “This request is in direct response to the impact that the novel Coronavirus (COVID-19) is having on our local businesses and communities.”

Trump said during an Oval Office address on Wednesday that he would direct the Treasury Department to “defer tax payments, without interest or penalties, for certain individuals and businesses negatively impacted” by the coronavirus.

The administration has said it intends to allow individuals and businesses to defer tax filing and tax payments, which could lift some pressure off the IRS by spreading the agency’s processing work out over several more months.

James Russell PLLC will continue to post updates as we receive more information impacting the current tax filing season. Contact us if you’d like to discuss your accounting needs today.

2020 Tax Season Tips, Part 2

Ready for the 2020 tax season?
Ready for the 2020 tax season?

In our last article, we introduced you to three changes you should know about for the 2020 tax season. In this article, we’ll share two more things to watch out for as you prepare for April 15. Don’t be caught off-guard by these or any other changes. Talk to tax professionals like those at James Russell, PLLC for professional advice.

Wayfair Decision Summary and Impact

State tax agencies are spreading a wider net to capture more sales tax on interstate transactions as a result of the June 2018 U.S. Supreme Court’s South Dakota vs. Wayfair decision in favor of the State.  This decision has changed the rules allowing States to initiate sales tax collections from businesses operating across state borders, without an in-state presence requirement.  As a result of this ruling, all 45 states with sales and use taxes are expected to enact revised nexus regulations in order to collect more revenue for their state coffers.

Although sales and use taxes have historically been the burden of the end user, the Wayfair decision has opened the path for States to shift collection and remittance obligations to the seller.  In addition, the tax obligations may not stop at the entity level.  Conducting business as a corporation or a limited liability company may not protect business owners and officers from personal state tax liability under the responsible person rules.

With the future of virtual marketplace growth in standard business sales and operations, the impact of the Wayfair decision will be shifting into high gear over the next several years.  So, hold on it may be a bumpy ride.

Estate Tax

Big changes happened with the Estate and Trust rules, as the Federal level exemption increased to $11.58 million.  However, caution should be taken as the Washington state threshold is holding at $2,193,000 so it is easy to cross the Washington estate tax threshold and incur an estate tax liability.  The average Woodway home is $1.5 million dollars as of October 2019, so by adding the value of your home, other real estate, retirement accounts, and life insurance, you are likely to surpass the Washington estate limit. Collaborating with your attorney and CPA to preserve the step-up basis, leveraging gifts, and optimizing tax savings will provide peace of mind for you and your family.

What’s Next?

Talk to your tax professional now to find the best way to save money in light of these changes. We would love to help you. Our expert CPAs are available for consultation so you can be sure you’re receiving the full benefit of the new tax laws.

2020 Tax Season Tips, Part 1

Ready for the 2020 tax season?
Ready for the 2020 tax season?

It’s a complex world, and with the huge overhaul of the tax code two years ago aimed at simplification, it seems to get more complicated.  Are you able to navigate the new tax law and get the best benefit?  Are you overpaying your taxes?  Do you feel that there is something not being addressed when Tax Day comes?  Here are some items to consider for 2020 and beyond.

Federal Tax Withholding

While the lower tax rates made headline news, behind the scenes the IRS decreased the amount of federal tax withheld from paychecks which was not widely publicized.  Unfortunately, this resulted in many taxpayers owing more than they expected, getting less back than expected, or in some cases, owing money when they usually receive a refund.  Heading into 2020, it would be advisable to speak with a tax advisor regarding adjustments to your withholding, so you are not surprised come tax time.

Tax Tip:  A new 2020 W-4 form has been released.  The form has a new look with revisions to determining withholding amounts.  Although it is not required to update your W-4 form each year, it is highly recommended to fill out a new W-4 form for 2020 if a recent tax return resulted in an unexpected tax liability.

Lost Deductions

We also saw the demise of the 2% miscellaneous deduction on Schedule A.  This was a big loss especially for salespeople and their mileage, employees who maintained home offices, or others who had unreimbursed business expenses from their employer.  If this affects you, now is the time to sit down with your employer to discuss the implications of this change and work towards a remedy to compensate you for the lost deductions.

Qualified Business Income (QBI)

The Qualified Business Income deduction (QBI) was part of the recent changes made by the Tax Cuts and Jobs Act.  Its aim is to eliminate the disparity between the 21% corporate tax rate and individual tax rate.  This provides a special deduction for self-employed, small business owners, and real estate investors.  The deduction can reduce the amount of your qualified business income by 20%.  However, the rules for claiming the QBI deduction are complicated and many restrictions apply.

There are some great ways to maximize your QBI deduction to help you pay less tax.  Being in the right entity or structure is imperative as well as how you structure payments to yourself.  It is recommended that you work with a qualified tax professional who can help you get the most out of this important tax break.  Maximization can be achieved with the right planning.

Next Steps

With all these changes in mind, speaking with your tax professional proactively is the best way to save money.  If you find yourself needing assistance, please come and talk with one of our experienced and knowledgeable CPAs at James Russell, PLLC.