{"id":10502,"date":"2020-06-25T18:47:27","date_gmt":"2020-06-25T18:47:27","guid":{"rendered":"https:\/\/jboitnott.com\/?p=10502"},"modified":"2020-06-29T19:29:11","modified_gmt":"2020-06-29T19:29:11","slug":"how-to-handle-estimated-tax-payments-during-covid-19","status":"publish","type":"post","link":"https:\/\/jboitnott.com\/zh\/how-to-handle-estimated-tax-payments-during-covid-19\/","title":{"rendered":"How to Handle Estimated Taxes During COVID-19"},"content":{"rendered":"<p>Small-business owners who prefer to pay estimated taxes as part of their overall tax strategy face an updated payment approach for 2020. Many may need to revisit their estimated payments for the first two quarters, which now have updated deadlines extended by the IRS.<\/p>\n<p>Learn how to calibrate your approach to tax payments this year by understanding some of the changes and what they mean for your business.<\/p>\n<h2><b>Changes to Your Estimated Taxes<\/b><\/h2>\n<p><a href=\"https:\/\/www.irs.gov\/newsroom\/payment-deadline-extended-to-july-15-2020\" target=\"_blank\" rel=\"noopener noreferrer\">The IRS has changed<\/a> the first two quarterly payments for estimated taxes, which were originally due on April 15 and June 15, 2020.<\/p>\n<p>Now, both of those estimated tax payments will be due on July 15, 2020. This is also the date that any income tax due from 2019 must also be paid. The other two estimated tax payments for the taxable year currently remain the same. Those are September 15, 2020 and January 15, 2021.<\/p>\n<p>The states where state income tax may also be due as an estimated payment have changed their guidelines and timeframe to match the federal extensions.<\/p>\n<p>Although an extension may feel helpful, many business owners are <a href=\"https:\/\/jboitnott.com\/zh\/20-common-business-funding-questions-and-answers\/\">making less money<\/a> these last few months. Quite a few small businesses are still\u00a0<a href=\"https:\/\/www.americanexpress.com\/en-us\/business\/trends-and-insights\/articles\/how-small-businesses-can-approach-a-temporary-shutdown\/\" target=\"_blank\" rel=\"noopener noreferrer\">closed<\/a>. This will make it hard to come up with the funds to pay 2019 income taxes along with the two 2020 quarterly estimated tax payments.<\/p>\n<h2><b>Creating a New Calculation and Payment Plan<\/b><\/h2>\n<p>There are several ways to tackle the financial challenge that COVID-19 has brought your business this year and still help ensure you meet your tax obligations.<\/p>\n<h2><b>File for an Extension<\/b><\/h2>\n<p>First of all, consider deferring part of the tax burden under the\u00a0<a href=\"https:\/\/www.irs.gov\/newsroom\/deferral-of-employment-tax-deposits-and-payments-through-december-31-2020\" target=\"_blank\" rel=\"noopener noreferrer\">CARES Act<\/a>\u00a0until the end of the year and into 2021. You may be able to request an automatic extension of time for filing your 2019 taxes. That could also postpone having to make any income tax payments associated with that year.<\/p>\n<p>One way to file an extension is to do it electronically by using\u00a0<a href=\"https:\/\/www.irs.gov\/pub\/irs-pdf\/f4868.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">Form 4868<\/a>. Ask your tax professional do it for you or use your own tax software. Businesses must file\u00a0<a href=\"https:\/\/www.irs.gov\/pub\/irs-pdf\/f7004.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">Form 7004<\/a>\u00a0for this automatic extension.<\/p>\n<p>Don\u2019t wait to file the extension if you believe it will be a financial burden to make payments. Currently, you must request the tax filing extension by July 15, 2020. Doing so can move your tax return deadline to October 15, 2020.<\/p>\n<h2><b>Determine Your New Estimate Taxes<\/b><\/h2>\n<p>Secondly, you can recalculate your estimated tax payment based on what might be a new income level.<\/p>\n<p>Look at your income for 2019 and the estimated tax payments you made for that year. If your current COVID-19 income is half that, then you could reduce your estimated tax payments by half. If your income is a quarter, then you may want to reduce your estimated tax payments down to that percentage.<\/p>\n<p>You can use online calculators to develop your new estimated tax amount. If you are unsure, the best strategy is to seek assistance from a tax professional you already use or get a referral from a colleague. They may also be able to provide other guidance on payments and tax planning.<\/p>\n<h2><b>Pay What You Can<\/b><\/h2>\n<p>Paying some tax in advance is better than paying none, according to the IRS. Make small estimated quarterly tax payments to show you\u2019re responsible when it comes to your tax obligations. If you received a stimulus check or any type of financial assistance, consider using some of that money to help cover taxes.<\/p>\n<p>If you\u2019re still struggling to make your 2019 tax payment, you can apply for a\u00a0<a href=\"https:\/\/www.irs.gov\/payments\/online-payment-agreement-application\" target=\"_blank\" rel=\"noopener noreferrer\">payment plan<\/a>, including a monthly installment agreement. Or, you can see if you qualify for an\u00a0<a href=\"https:\/\/www.irs.gov\/payments\/offer-in-compromise\" target=\"_blank\" rel=\"noopener noreferrer\">offer in compromise<\/a>, which is a way to negotiate settling your tax debt for less. Furthermore, you can ask the IRS to\u00a0<a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/temporarily-delay-the-collection-process\" target=\"_blank\" rel=\"noopener noreferrer\">temporarily delay collection<\/a>\u00a0until your financial situation improves later in the pandemic or after COVID-19 passes.<\/p>\n<p>While you may not have considered ever withdrawing funds from your IRA, this may be the most appropriate time to do it because there may not be any tax consequences. The changes from the IRS now let you\u00a0<a href=\"https:\/\/www.irs.gov\/newsroom\/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers\" target=\"_blank\" rel=\"noopener noreferrer\">take out up to $100,000<\/a> to use how you like. Pay it back within three years to avoid any tax burden.<\/p>\n<p>Don\u2019t wait to file the extension if you believe it will be a financial burden to make payments.<\/p>\n<h2><b>Beyond Estimated Taxes: Other Notable Changes<\/b><\/h2>\n<p>Beyond determining your 2019 income tax strategy and quarterly estimated taxes, there are other important tax changes that may impact what you pay.<\/p>\n<p>The recently passed CARES Act provides an employee retention credit as well as payroll tax deferral relief for self-employed individuals and all employers. The payroll tax can be deferred until the end of 2021 when half is due. The other half must be paid by the end of 2022.<\/p>\n<p>A similar option is available for the self-employed. You may be able to defer half of your liability for the Social Security tax component of the self-employment (SE) tax. This relief has the same deferment timeframe as the payroll tax deferment.<\/p>\n<p>Another reason to check with your tax professional is that some of the tax relief measures offered up by the CARES Act are retroactive, affecting both 2018 and 2019 returns that have already been filed for you or your business. This may change what you owe for 2019 income taxes and also help you re-evaluate your estimated tax payments.<\/p>\n<p><em>Thanks for reading! If <\/em><em>you enjoyed this piece please consider sharing it around, liking me on\u00a0<\/em><a href=\"https:\/\/m.facebook.com\/jboity\" target=\"_blank\" rel=\"noreferrer noopener\"><em>Facebook<\/em><\/a><em>, following me on\u00a0<\/em><a href=\"https:\/\/twitter.com\/jboitnott\" target=\"_blank\" rel=\"noreferrer noopener\"><em>Twitter<\/em><\/a><em>, and maybe throwing some money into my hat on\u00a0<\/em><a href=\"https:\/\/www.patreon.com\/Boitnott\" target=\"_blank\" rel=\"noreferrer noopener\"><em>Patreon<\/em><\/a><em>,\u00a0<a href=\"https:\/\/www.paypal.me\/Boitnott\" target=\"_blank\" rel=\"noreferrer noopener\">Paypal<\/a>, or with Etherium:. 0X24AC7A8FF92721B9827A03A6936FE169B864C94<\/em><\/p>","protected":false},"excerpt":{"rendered":"<p>Small-business owners who prefer to pay estimated taxes as part of their overall tax strategy face an updated payment approach for 2020. Many may need to revisit their estimated payments for the first two quarters, which now have updated deadlines extended by the IRS. Learn how to calibrate your approach to tax payments this year [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":10505,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[669],"tags":[647,272,652,671,670],"class_list":["post-10502","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-taxes","tag-covid-19","tag-finance","tag-managing-money","tag-tax-and-covid-19","tag-taxes"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How to Handle Estimated Taxes During COVID-19 - John Boitnott<\/title>\n<meta name=\"description\" content=\"The IRS has changed deadlines for your estimated tax payments. 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