Q

How will the coronavirus pandemic affect my taxes?

A

Tax Day 2020 has been moved and taxpayers now have until July 15, 2020, to file their federal income taxes and to make any necessary payments to the IRS.

Derek Silva

Derek Silva

Published March 20, 2020

info
Advertising Disclosure

KEY TAKEAWAYS

  • July 15, 2020, is the deadline to file your federal income taxes and to pay any tax bill you owe

  • File your taxes as soon as you can because almost three-quarters of taxpayers get a refund, with the average refund being about $3,000

  • States set their own filing deadlines and most have offered extensions, but check with your state before waiting until July

  • Medical expenses from COVID-19 or a job change may allow you to claim different tax deductions next year

The deadline to file your 2019 federal income tax return is July 15, 2020. The Department of the Treasury decided to extend the normal tax filing deadline (April 15) by 90 days because of the economic disruption caused by the COVID-19 coronavirus. If you will owe a tax bill when you file your taxes, you also have until July 15 to pay the IRS before it begins to charge you late fees and interest.

We still recommend that you file your taxes as soon as possible because the sooner you file your taxes, the sooner you will get your refund. IRS data from 2019 shows that 72% of all tax returns got a refund last year. So far in 2020, 78% of all tax returns have received a refund, at an average value of $2,973. Even a below-average tax refund could go a long way to help those who have lost income during this pandemic. For help filing your taxes, try our guide to filing taxes in 2020.

If you will owe a tax bill, filing sooner can still help you. You have until July 15 to pay, even if you file your taxes sooner, and knowing exactly what you owe ahead of the deadline can help you to create a plan for how you will pay that bill.

As the current situation changes, you can find the latest coronavirus tax updates on the IRS website.

In this article:

When are state tax returns due?

The tax filing extension from the Treasury Department only applies to federal income tax returns. Individual states do not have to extend their filing deadlines, and you may still have to file your state income taxes by April 15. Check your state’s website to find the latest information on tax deadlines. If your state doesn’t extend the filing deadline and you still need more time to file, you may be able to get an extension from your state.

What if I need more time to file my taxes?

If you can't file your taxes by July 15, you can request a free tax extension from the IRS. An extension will give you until October 15 to file. Tax extensions are automatic, so anyone who asks for one will get one as long as they request an extension by July 15. States that collect income tax also offer tax extensions, but you need to apply through the individual state, not through the IRS.

A tax extension only gives you more time to file your return (submit it to the IRS). If you owe a tax bill, you still need to pay by July 15, even though an extension gives you until October to file.

Learn how to apply for a tax extension.

policygeniusSymbolCenter

There are two certainties in life: death and taxes.

Life insurance can help your family settle up with Uncle Sam after you’re gone.

How the coronavirus pandemic may affect your next tax return

The income taxes that you need to file by July 15, 2020, are for 2019. The fallout from the coronavirus pandemic will not affect those taxes, because they only cover income and expenses from 2019. However, you may see some changes to your 2020 income taxes, which you will file in early 2021.

Changes to your income

Employers across the country are laying off workers as a result of market downturns caused by the coronavirus outbreak. Many people may find they need to earn income as an independent contractor or freelancer, which means how they file taxes could change.

Income is usually reported to workers on one of two tax forms: Form W-2 or Form 1099. A W-2 is the standard form for employers to report the income they paid regular employees and the amount of tax the employer already withheld for the employee. Form 1099 is sent to workers who don't have any tax withheld by their employer. If you are a freelancer or independent contractor, you will likely receive a copy of Form 1099-MISC. Unemployment benefits are reported on Form 1099-G.

(Here’s our complete guide to 1099 forms.)

If your employer doesn't withhold taxes, you may end up with a tax bill come tax season because you’re supposed to pay income taxes throughout the year. To avoid having a bill, independent contractors and freelancers may need to file estimated taxes. Estimated taxes are quarterly payments that you make to the IRS, based on the income you think you will earn during the year. Learn more in our guide to estimated taxes.

The medical expense deduction

If you get sick with COVID-19 and have significant hospital bills, you may qualify for the medical expense deduction.

The medical expense deduction allows you to deduct any medical or dental expenses you incur that exceed a certain percentage of your adjusted gross income (AGI). On your 2020 taxes, the medical expense deduction is available for medical expenses that exceed 10% of your AGI. (The threshold for 2019 taxes is 7.5% of your AGI.)

However, you can only claim the medical expense deduction if you can itemize your deductions. A recent tax study by Policygenius, using the latest IRS data, found that only about 11% of taxpayers qualify to itemize after the 2017 tax reform, which doubled the standard deduction.

(To protect yourself from losing your income in the event you become sick with COVID-19 and cannot work, consider disability insurance. Here’s how disability insurance can protect you from COVID-19.)

Home office deduction

Taxpayers who are self-employed or who do freelance work at home — including people who get a 1099-MISC — may be able to claim the home office deduction. This allows you to deduct work expenses, including some office supplies, desk and furniture costs, some utility payments, and some renters insurance.

You can claim the home office deduction by completing IRS Form 8829. You will also need to file Schedule C, which allows you to report self-employment income. Anyone who receives a 1099-MISC or has other freelance income probably needs to complete Schedule C.

If you have your own business, including anyone who starts a business in 2020, you may also qualify to deduct business expenses. You can learn more about deductible business expenses from the IRS.

Get the latest money news and financial advice from Policygenius experts, delivered right to your inbox.