Tax day for 2019 is finally around the corner.
Taxpayers must file their returns and pay any outstanding liabilities by July 15 this year, three months later than the typical tax deadline due to the coronavirus. In March, the Internal Revenue Service gave Americans extra time to get their tax business together as they weathered the pandemic and ensuing lockdowns.
Read more: How to file taxes: The full breakdown
But the extended deadline applies to more than just the returns and tax payments.
Self-employed workers face multiple due dates on July 15, while those with unclaimed refunds from 2016 have until that date to finally get them. You have until July 15 also to lower your taxable income, or pay penalties on early retirement withdrawals.
Here’s what the extended deadline affects.
If you’re a freelancer
Self-employed workers — such as freelancers or contractors — typically prepay their taxes four times a year because they don’t have W-2 withholding like regular full-time workers do. On July 15, these self-employed workers must pay two tax bills if they haven’t already along with sending in their 2019 tax return.
Under normal circumstances, self-employed workers must pay quarterly estimated taxes on April 15 and June 15 to cover the first two quarters of the year. The tax payments are based on what they made in the previous quarter. Now, both those payments are due by July 15.
The remaining quarterly payments resume the regular schedule with the next tax payment deadline on Sept. 15 for income earned between June 1, 2020 and Aug. 31, 2020. The last due date for 2020 estimated taxes is Jan. 15, 2021 for income earned between Sept. 1, 2020, and Dec. 31, 2020.
Last-minute moves to lower taxes
If you still want to lower your taxable income — maybe because you owe more than you’d like — you can do that in two ways before the July 15 deadline: add contributions to retirement savings or your health savings account.
Retirement savings: You can increase contributions to an employer-based 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan as well as a traditional IRA, all of which are funded by pre-tax earnings.
The maximum limit for 2019 contributions to a 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is $19,000, while it’s $6,000 for traditional IRAs. Those 50 and up can contribute an additional $6,000 to their employer-based plans and $1,000 in their IRA.
You also have until July 15 to make extra contributions to SEP-IRAs, which are used by self-employed taxpayers. Contributions to these accounts can’t exceed 25% of compensation or $56,000 for 2019, whichever is less.
HSAs: You also can add more contributions to a health savings account, or HSA, for the 2019 tax year to reduce your taxable income. If you use funds in these accounts on eligible medical expenses, the withdrawals are not taxed.
Read more: How to reduce your taxable income
Another plus: Earned interest is tax-deferred or tax-free if used for medical costs. Unused funds can roll over to the next year. If you still have an HSA when you reach 65, the funds can be used for any purpose, penalty-free.
Early withdrawal penalties due
If you took out an early withdrawal from your retirement account last year, the 10% tax penalty you must pay is now due July 15. It was extended from the original date of April 15.
Last chance for 2016 refunds
An estimated 1.4 million Americans are owed more than $1.5 billion in unclaimed refunds from 2016, which works out to a median amount of $861. Taxpayers generally have three years to file their federal tax returns to claim a refund. Otherwise, the money goes to the U.S. Treasury.
To claim a 2016 refund, taxpayers must file those tax returns by July 15.
Old tax returns can’t be filed electronically; they can only be filed by paper. The return must be properly addressed and mailed with a postmark by July 15 to make the deadline. If you don’t have the necessary documents to fill out a 2016 return, you can use the online transcript tool at the IRS to retrieve W-2s and 1099s from previous years.
There is no penalty for filing late if you are getting a refund. But if you haven’t filed your 2017 or 2018 tax returns, your 2016 tax refund could be held up. If you owe money to the IRS or a state tax agency or have unpaid child support or federal debts, your 2016 refund could be applied to those instead.
How to pay your tax bill
You have several options to pay your tax bill in full if you can afford it, which is due on July 15.
Automatic withdrawal: You can have your payment taken directly from your bank account when you choose the e-pay option offered by your tax prep software or your tax pro. You also can pay the Internal Revenue Service directly through its "Direct Pay" online service for free.
Debit or credit card: You can pay by online or over the phone using PayUSAtax, Pay1040 or Official Payments, which charge a service fee.
Cash: Some participating retailers like 7-Eleven allow you to make your tax payment with cash. There’s typically a small fee and the payment takes five to seven business days to process your payment, so make the payment a week before the July 15 deadline.
Check, money order, or cashier’s check: Mail it to the address listed on the notice or instructions. Make it payable to the U.S. Treasury and include:
Social Security number or employer ID number
Any related tax forms or notice numbers
Same-day wire: Some banks provide this service. Ask your bank for details.
What if you can’t pay your tax bill?
The IRS encourages taxpayers who owe money to pay as much as possible by the July 15 deadline. If they are facing a financial hardship for any reason and can’t pay their tax bill in full, there are several options for repaying over time.
The IRS offers three options for those who can’t pay: Installment plans, delayed payment, and offer in compromise.
Installment plans: You can apply for a short- or long-term monthly installment plan online with the IRS. There’s no set-up cost for a short-term plan, which is less than 120 days.
There’s a $31 fee to set up a long-term plan that lasts more than 120 days. If you owe more than $25,000, there’s a $149 fee to set up a payment plan and payments must be made automatically from your checking account. You still pay accrued penalties and interest on all plans.
Offer in compromise: You can offer to settle for less than your tax debt. The IRS considers your ability to pay, income, expenses, and asset equity. The agency requires that you explore other payment options before submitting an offer in compromise. Not all offers are accepted.
Delayed payment: You can request for a temporary delay in payment. The IRS will grant your request if it finds you can’t pay any of your tax bill based on your financial circumstances. Interest and penalties will still accrue during this time, and the IRS may file a federal lien against you.
What if you need more time?
Taxpayers who can’t file by the July 15 can request an extension until Oct. 15, 2020 by filing a Form 4868 electronically by using Free File from the major tax prep companies or by mailing a paper form to the IRS address for your state. Either option must be done by July 15.
You don’t have to file a separate extension form if you pay all or part of your estimated tax bill using Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or a credit or debit card and indicating the payment is for an extension.
If you expect to get a tax refund, you won't get it until after you file your tax returns and the IRS processes that return. If you owe a tax bill, you still must pay any liability to the government by the July 15 deadline to avoid late-payment penalties and interest.
The IRS doesn’t care if you file for an extension — you can request one for any reason, including laziness and procrastination.