July 15 is the new April 15 for those who still have not filed a tax return. The traditional April income tax deadline was extended this year for 2019 tax returns, due to the upheaval created by COVID-19.
The one-time extension applied for Michigan returns too, as well as the City of Detroit returns.
Think everybody who waited owes big money? Think again. Oddly enough, experts say millions of procrastinators are likely owed a federal income tax refund for 2019.
H&R Block estimates that more than half of its clients who still need to file would receive a refund after they file. And the tax giant is running TV ads this summer highlighting the prospects of a tax refund.
As many as 11.3 million people still had not received federal income tax refunds for 2019 taxes — down 10.8% from a year ago, based on data through June 19 from the IRS.
Many of those people already filed; others have not.
Many people are furious that they filed long ago and still have not received big refunds. Blame the IRS backlog.
The IRS has ended up processing 11.4% fewer returns through June 19 than at the same time last year. Many IRS operations, including mail facilities, were shut down for some time due to the pandemic.
Many taxpayers who filed 2019 paper returns, for example, could still be waiting for their federal income tax refunds. “The IRS had to suspend the processing of paper tax returns, and as of May 16, it estimated it had a backlog of 4.7 million paper returns,” according to the National Taxpayer Advocate’s report to Congress.
Although the IRS is reopening some operations, the taxpayer advocate noted that “it is not clear when it can open and log all the returns sitting in mail facilities.”
In addition, many people have been caught in a cycle of having to verify their IDs with the IRS to avoid refund fraud.
“The IRS is processing refunds much slower due to their closing of client service and processing centers and their emphasis on getting stimulus checks out,” said George W. Smith, a CPA with Andrews Hooper Pavlik.
“The biggest glitch is if a taxpayer needs help from the IRS. It’s been pretty much non-existent.”
Make no mistake, most people are done worrying about their 2019 income taxes. The Internal Revenue Service has already processed nearly 126.6 million returns through June 19.
Even so, millions of taxpayers still did not file a 2019 tax return yet. Some did delay because they owed money and the July 15 extension waived penalties and interest for those who owed.
Some could easily have done their taxes via TurboTax or some other software; they just decided to delay everything as long as possible.
Others didn’t feel safe going anywhere to get their taxes done. On top of that, many tax preparation offices closed during the economic shutdown that was put in place in many states, including Michigan, to stem the spread of the coronavirus.
The IRS shut down its live phone lines for answering questions, as well as Taxpayer Assistance Centers at the height of the tax season amid the health crisis.
For a short time, some buzz had built that maybe the procrastinators would get another break. But on June 29, the Department of Treasury and the IRS announced that the tax filing and payment deadline of July 15 will not be postponed.
“We think after the July 4 holiday (there) will be a ‘wake-up call’ and people will realize the deadline is coming fast,” said Nathan Rigney, lead tax research analyst with The Tax Institute at H&R Block.
Here’s what you should know if you need to file by July 15:
Will I be able to find tax help?
Some tax preparation sites are open to walk in customers who want to drop off their taxes but you may need an appointment if you want to sit down and talk with someone. It’s best to call first.
Jackson Hewitt is offering a “Document Drop Off” where clients can drop off their tax documents at a local office – and introduced a “Tax Pro From Home” service enabling clients to work with a tax professional remotely.
H&R Block has a new pilot program that offers “pick-up tax service” in three cities: Detroit, San Diego and Pittsburgh.
With the service, an H&R Block tax professional comes to a client’s home to pick up tax documents. The return is then prepared and the taxpayer reviews the return and approves it remotely.
An H&R Block survey indicated that 58% of Detroit residents are anxious about leaving their homes. Some may work in jobs that require them to self-quarantine; others may have health issues that make it necessary to be more cautious. To schedule a pick-up appointment, call your participating office at 800-472-5625.
It’s still possible to find free tax help, if you qualify, too.
The Accounting Aid Society has temporarily halted all walk-in services due to COVID-19. But many lower- and middle-income families will still be able to receive free online services.
The nonprofit volunteer income tax assistance group is offering to prepare taxes through what it calls “VITA ACE” for those with incomes up to $56,000. See https://accountingaidsociety.org/vita-ace/. Or you can call 313-556-1920.
The “ace” stands for “accessible, convenient and electronic.”
The Accounting Aid Society is able to prepare your taxes entirely online, while consumers stay safe at home. So far this year, the group has served more than 1,300 taxpayers through the VITA ACE program. Services will continue through the end of 2020 and can assist consumers with meeting the Sept. 30 home heating credit deadline and those needing to file prior year returns in order to access Economic Impact Payments and other benefits.
To tap into the program, you would need a smartphone, tablet or computer with a working camera. In addition, the service requires that you have a valid email address you can access. And, of course, you’ll need identification and your tax documents.
Can I get more money by filing by July 15?
Yes. An unexpected consequence of waiting until now to file, H&R Block’s Rigney noted, is that the IRS may owe you interest if you are due a refund and file by July 15.
“That’s because the IRS recently announced that if you are a due a refund, the IRS will pay you interest for each day that passes after April 15 until the IRS issues the refund,” he said.
“Interest rates range from 3% to 5% depending on when the IRS refunds your overpayment,” Rigney said.
The interest could be included with your refund check or issued separately depending on timing.
Do I need to file a state tax return now too?
Several states, including Michigan, offered an extension of the income tax deadline until July 15 to match the federal extension.
The Michigan Department of Treasury reiterated that state income tax returns must be submitted electronically or sent through the U.S. Postal Service before midnight on Wednesday, July 15.
In Michigan, the Treasury estimates that the state is down around 640,000 individual income tax returns, which either need to be filed by July 15 or consumers can request an extension to Oct. 15. In a normal tax year, the state is typically down around 1.5 million returns right before April tax deadline, according to Ron Leix, a spokesman for the Michigan Department of Treasury.
As of June 26, the state has issued $1.9 billion in tax refunds to more than 3.1 million filers. The average refund amount was a bit more than $628.
Michigan’s Treasury also noted that individual income tax estimated payments for tax year 2020 –— originally due April 15 and June 15 — are due on July 15.
Often workers in the gig economy — freelancers, the self-employed, investors, retirees and others — may need to make estimated payments because a substantial part of their income is not subject to withholding tax.
If you make estimated payments each quarter for your federal taxes, you’d also owe the April 15 and June 15 payments for tax year 2020 on July 15.
How do I pay?
If you owe money but don’t have it, the IRS has a variety of payment options. See IRS.gov/payments.
Taxpayers can even make a cash payment if they don’t have a bank account or credit card at participating 7-Eleven stores, Ace Cash Express and Casey’s General Stores nationwide. There is a $1,000 payment limit per day and a $3.99 fee per payment. And you should look into the “PayNearMe” program before the tax deadline because it involves a three-step process that takes time to complete. It can take five to seven business days to process those payments.
What if I don’t have my paperwork in order yet?
It is still possible to file IRS Form 4868 on or before July 15 to receive an automatic extension until Oct. 15 to file your tax return. That’s an extension for filing a return, though. If you owe money, you would still need to pay what you owe by July 15 or be subject to penalties and interest.
