July 1 - Time for a Mid-Year Tax Check Up
Time to review your 2020 year-to-date income and expenses to ensure estimated tax payments and withholding are adequate to avoid underpayment penalties or to determine if the estimated payments and/or withholding can be reduced because your income has declined as a result of the COVID-19 emergency.
July 1 - Time to Call for Your Tax Appointment if You Haven’t Yet Filed Your 2019 Return
It is only 2 weeks until the July 15 due date for your 2019 individual income tax return that normally would have been due in April, but because of the COVID-19 emergency, was automatically extended by the IRS. If you have not made an appointment to have your taxes prepared, we encourage you to do so before it becomes too late. If you have already had your appointment but still have not gotten all of your tax information to this office, please contact us so that a 3-month extension can be prepared for you. If you will owe tax, payment needs to be made with the extension request.
July 10 - Report Tips to EmployerIn addition to the 180 days, the deadline is also extended by the number of days that were left for the individual to take an action with the IRS when they entered a combat zone/qualified hazardous duty area or began serving in a contingency operation.
It is not a good idea to delay filing your return because you owe taxes. The late filing penalty is 5% per month (maximum 25%) and can be a substantial penalty. It is generally better practice to file the return without payment and avoid the late filing penalty. We can also establish an installment agreement, which allows you to pay your taxes over a period of up to 72 months.
Please contact this office for assistance with an extension request or an installment agreement.
July 15 - Estimated Tax Payments – Individuals
The first and second installments of 2020 individual estimated taxes (Form 1040-ES) are due. Normally, these payments would have been due April 15 and June 15, respectively, but because of the COVID-19 emergency, the IRS extended the due dates to July 15.
Our tax system is a “pay-as-you-earn” system. To facilitate that concept, the government has provided several means of assisting taxpayers in meeting the “pay-as-you-earn” requirement. These include:
When a taxpayer fails to prepay a safe harbor (minimum) amount, they can be subject to the underpayment penalty. This penalty is equal to the federal short-term rate plus 3 percentage points, and the penalty is computed on a quarter-by-quarter basis.
Federal tax law does provide ways to avoid the underpayment penalty. If the underpayment is less than $1,000 (the de minimis amount), no penalty is assessed. In addition, the law provides "safe harbor" prepayments. There are two safe harbors:
Example: Suppose your tax for the year is $10,000 and your prepayments total $5,600. The result is that you owe an additional $4,400 on your tax return. To find out if you owe a penalty, see if you meet the first safe harbor exception. Since 90% of $10,000 is $9,000, your prepayments fell short of the mark. You can't avoid the penalty under this exception.
However, in the above example, the safe harbor may still apply. Assume your prior year’s tax was $5,000. Since you prepaid $5,600, which is greater than 110% of the prior year’s tax (110% = $5,500), you qualify for this safe harbor and can escape the penalty.
This example underscores the importance of making sure your prepayments are adequate, especially if you have a large increase in income. This is common when there is a large gain from the sale of stocks, sale of property, when large bonuses are paid, when a taxpayer retires, etc. Timely payment of each required estimated tax installment is also a requirement to meet the safe harbor exception to the penalty. If you have questions regarding your safe harbor estimates, please call this office as soon as possible.
CAUTION: Some state de minimis amounts and safe harbor estimate rules are different than those for the Federal estimates. Please call this office for particular state safe harbor rules.
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At IAM Accounting LLC, we take pride in our diverse and experienced team of professionals, each dedicated to providing exceptional service in accounting, tax planning, payroll, and financial management. Our team members bring a wealth of knowledge from various financial backgrounds, working together to ensure that every client receives the personalized attention and expertise they deserve. From managing complex accounting operations to providing tax-saving strategies, we’re here to help you achieve your financial goals with precision and care.
Ibrahim leads IAM Accounting LLC, offering expert tax strategies and financial guidance to help clients reduce tax liabilities and achieve their financial goals.
Jasleen is a highly skilled Controller with over five years of experience as a Chartered Accountant. She ensures accurate financial management and oversees accounting operations.
Sahil is a Chartered Accountant and tax preparer with expertise in tax compliance, financial reporting, and strategic tax planning, helping clients optimize their financial outcomes.
Ankit brings a wealth of experience in finance and accounting, providing key support in day-to-day financial operations to ensure accuracy and compliance.
Neha manages our most valued client relationships, with over four years of experience as a Chartered Accountant, ensuring that client needs are met efficiently and professionally.
Michael is our dedicated payroll expert and ADP partner, managing payroll processes with precision and helping clients navigate payroll services seamlessly.