Today is the Filing Extension Deadline

Most taxpayers who requested an extension of time to file their 2018 tax return must file today, October 15th. Those filing today who also owe should pay as much as possible to reduce interest and penalties.

There are some groups who still have time to file after October 15:

● Members of the military and others serving in combat zones typically have until at least 180 days after they leave the combat zone to both file returns and pay any taxes due.

● Taxpayers in federally-declared disaster areas who already had valid extensions may have more time to file.

Tax Relief for Victims of Tropical Storm Imelda

Victims of Tropical Storm Imelda in parts of Texas, including the Houston area, have until Jan. 31, 2020, to file various individual and business tax returns and make tax payments.

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. Currently this includes Chambers, Harris, Jefferson, Liberty, Montgomery and Orange counties in Texas. Taxpayers in localities added later to the disaster area will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

The tax relief postpones various tax filing and payment deadlines that occurred starting on Sept. 17, 2019. As a result, affected individuals and businesses will have until Jan. 31, 2020, to file returns and pay any taxes that were originally due during this period. For example, individuals who had a valid extension to file their 2018 return due to run out on Oct. 15, 2019, will now have until Jan. 31, 2020, to file. The IRS noted, however, that because tax payments related to these 2018 returns were due on April 15, 2019, those payments are not eligible for this relief. The Jan. 31, 2020 deadline also applies to quarterly estimated income tax payments due on Jan. 15, 2020, and the quarterly payroll and excise tax returns normally due on Oct. 31, 2019.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. Taxpayers who live outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area need to contact the IRS.

What is a Tax Basis?

A tax basis is the value of an asset used for computing a gain or loss when the asset is sold. A taxpayer is liable for capital gains tax if the asset is sold at a price higher than its basis. If the basis is higher, the tax liability is lower because there is less gain to be taxed.

In most situations, the basis of an asset is its cost to you (i.e. the amount you paid for it). However, there are special rules that apply in several situations. For example, if you receive an asset from a decedent (e.g. by will or through inheritance), the basis is the fair market value on the day of the decedent’s death in most cases. So, you acquire a “step-up” in basis. Assuming the value of the asset increased after the original owner acquired it, you will only be liable for capital gains tax on the appreciation of the asset during your time of ownership of the asset.

In addition, the basis can change over time. For example, the cost of improvements that add to the value of the property increase the basis, and allowable depreciation decreases the basis. When such changes occur, your basis is called an "adjusted basis."