why does H20 form a covalent bond and not an ionic bond?

H2O is an ionic compound. It dissociates to H+ and OH-. This is in part why it is such a special molecule.

Atomic oxygen is highly electronegative, second only to fluorine, which means it will readily accept a negative charge.

In other words, the electrons are not even closed to being equally shared.

Basically water is covalent. If you consider pH then pH 7 neutral has an extremely low concentration of H+ ions. 10 -7
H+ virtually does not exist on Earth, except in the Giant Hadron Collider and similar machines. The energy of a single proton with no electron is too much to exist. So it bonds to something which will donate a pair of electrons to the bond. ( It can't give any as it doesn't have any ).
So in aqueous solution water forms H3O+  and OH- . In fact H3O+ forms more complex molecules such as H(3H2O)+
So hydrogen as a single atom under normal conditions cannot form an ionic bond.

Atoms are always playing a "tug-of-war" for valence electrons in an attempt to complete their valence shells.  Who wins depends on the relative electronegativity values and differences between them.  Arbitrarily, when the difference between electronegativities becomes greater than 1.7, one atom is able to rob the other of its valence electrons and the bond is considered ionic.  When the electronegativity difference is between 0.4 and 1.7, neither atom is ready to relinquish its valence electrons, but one atom pulls those electrons closer to itself than the other making the bond polar covalent.  When the difference in electronegativities is below 0.4, neither atom has a significant advantage over the other, and electrons are shared equally between them in a non-polar covalent bond.  

The electronegativity of oxygen is 3.44, and that of hydrogen is 2.1.  The difference between the two is 1.34.  That indicates that any bond between a hydrogen atom and an oxygen atom is polar covalent.