Hello weird, scary, frustrating June 2020. We're sort of glad you're here, even though the coronavirus means many of us aren't going to be taking a summer vacation and many more of us will still be messing with 2019 taxes until mid-July.
Yep, as everyone knows by now, COVID-19 precautions by the Internal Revenue Service have pushed this year's Tax Day to July 15.
That means June, whose start today is around six weeks from the filing deadline, is essentially March as far as tax moves if you've yet to file.
That's why the first of the five tax moves highlighted in this post reverts back to our happier — OK, not necessarily happier, but more predictable — pre-coronavirus tax days.
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 myriad other tax documents that contain data you need to transfer to your tax return. Also check out this checklist for other material that you might need to complete your 2019 tax tasks. And don't forget about your associated URL state tax responsibilities, most of which in states with personal income taxes also are URL pushed to July 15.
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.
5. Get ready for storms. June 1 is the official start of the Atlantic/Gulf of Mexico hurricane season. Mother Nature didn't get the memo. She's already sent us two named tropical storms, Arthur and Bertha, and formation of a third is possible this week in the Gulf. That's why it's past time to prepare for storms, both physically and financially.
Most forecasters, including Uncle Sam's official meteorologists at the National Oceanic and Atmospheric Administration (NOAA) expect 2020 to bring as many as 19 named storms, with six to eight possibly becoming hurricanes. Three to six of those 'canes could reach major status, which is category 3, 4 or 5 with winds of 111 mph.
Even if the final numbers when hurricane season ends on Nov. 30 are lower, it only takes one to change your life dramatically. So take storm planning seriously, even if you don't live along a coast. Ocean-birthed storms don't stop once they make landfall. They move inland, and historically more people suffer major damage and deadly situations from flooding rather than hurricane force winds.
You also can find in that same column some more June Tax Moves to make during these 30 days. They're just below the ticking tax-filing deadline countdown clock under an image like the one at the left. Peruse them at your leisure.
I know substituting tax planning and tax tasks for what usually is summer excursion time is not ideal. But hey, that's where we are right now. So take the time you're still stuck at home waiting for the full health safety clear to check out tax options to occupy you this June.
It's better to be safe, both when it comes to COVID-19 exposure and taxes, than sorry.
|Coronavirus Caveat & More Information
In 2020, we're all dealing with extraordinary circumstances,
both in our daily lives and when it comes to our taxes.
The COVID-19 pandemic and efforts to reduce its transmission
and protect ourselves and our families means that,
for the most part, we're focusing on just getting through these trying days.
But life as we knew it before the coronavirus will return,
along with our mundane tax matters.
Here's hoping that happens soon!
In the meantime, you can find more on the virus and its effects on our taxes
by clicking Coronavirus (COVID-19) and Taxes.