NOTE: Since publication, the government has issued changes to the tax filing deadline. More up-to-date information is available here.
On Tuesday, March 17, 2020, the federal government announced changes for the upcoming federal income tax deadline. According to Treasury Secretary Steven Mnuchin, taxpayers will receive a three-month (90-day) reprieve to pay the federal income taxes they owe for 2019.
Speaking at a White House press conference, Mnuchin revealed that the Internal Revenue Service (IRS) is deferring $300 billion in IRS payments by 90 days, penalty free. At this time, the April 15 filing deadline remains in effect. Taxpayers may file for a six-month extension, which would allow them until October 15, 2020, to file.
The payment extension gives individuals and corporate taxpayers 90 additional days to remit payments due with their 2019 income tax returns, subject to certain limitations. Once the Treasury issues written guidance addressing this extension, additional details or provisions may be included.
Mnuchin indicated that “all you have to do is file your taxes… You’ll automatically not get charged interest and penalties.”
The payment extension applies to both individuals and corporations with payments due April 15, 2020. The following was included in the Treasury’s update:
- Individuals can defer up to $1 million in taxes due.
- Corporations can defer up to $10 million in taxes due.
- Delayed payment of estimated quarterly tax payments paid by self-employed workers and businesses is also being considered. The first quarter estimated tax payment for individuals and corporations is currently due April 15.
- It is critical to note that these payment deadlines apply to federal returns; they do not automatically apply to your state filing and payment requirements.
The IRS routinely extends the filing deadline for victims of natural disasters. It remains to be seen if they will grant an extension of the filing date as well. According to the IRS, as of March 6, 2020, nearly 68 million individuals had already filed their tax returns. This makes up about 45% of the returns the agency expects to receive this year.
In the meantime, officials continue to urge people to file by April 15, especially if they are expecting a refund.
How we got here
The announced payment relief comes only four days after President Donald Trump declared the coronavirus pandemic a national emergency. Per Internal Revenue Code Sec. 7508A, the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, allows the IRS to delay certain tax filing and payment deadlines.
As early as last Tuesday, March 10, 2020, members of Congress began calling for a delay in the April 15 deadline, and last Wednesday, March 11, the American Institute of Certified Public Accountants (AICPA) called for the Treasury and IRS to provide relief for all taxpayers.
Stimulus plan in the works
In addition to the announced payment relief, Congress and the Trump administration are working on various relief packages.
To help mitigate the economic impact of the COVID-19 virus, the House of Representatives passed the Families First Coronavirus Response Act. In its current form, the Act includes two payroll tax credits to help employers cover wages paid to employees needing time off due to the virus.
This legislation now waits for action in the Senate. At press time, it is not clear whether the Senate will approve the bill as drafted or choose to modify it. Modification would require another pass through the House of Representatives.
Furthermore, the White House is proposing an $850 billion stimulus as part of a broader relief package in an effort to maintain liquidity in the economy and assist struggling industries. Mnuchin also said the administration is assessing ways to get cash to Americans “quickly.”
Squar Milner is Here for You
As we all attempt to navigate this ever-changing and unprecedented time, we are here to keep you up-to-date on the latest tax announcements. We are prepared to work alongside you to develop viable tax and business strategies as you and your business work through these trying times.