Some of you may be concerned about the impact of the Coronavirus aka Covid-19 outbreak on your taxes, and those of your clients. The news from the IRS has been slow in coming. On Friday of last week President Trump declared a National Emergency. At the same time, he directed Treasury Secretary Mnuchin to provide relief from “tax deadlines” to Americans who are adversely impacted by the emergency. This allows the IRS to extend various deadlines for up to a one-year period. This authority is not, however, self-executing. That is, the IRS must specify exactly which due dates, and for how long they are being extended.
Prior to President Trump’s announcement Secretary Mnuchin had told reporters that most deadlines would be extended for “small businesses” and most individuals other than the “super rich.” Our tax lawyers couldn’t find a definition of super rich anywhere in the Internal Revenue Code. Finally, this morning, Tuesday March 17th, after partnership and certain LLC returns were already due, Mnuchin stated in a press conference that the filing deadline for the 2019 income tax return would be extended by 90 days. For individuals that would mean July 14th. Presumably, the IRS will actually extend the date to July 15th just to make things a touch easier. Individuals living overseas already have an extension to June 15th so presumably they would have until September 15th to file.
In addition to stating that the income tax filing deadline would be extended, Mnuchin also stated that the 2019 payment deadline for income taxes owed of less than $1 million dollars for individuals or $10 million for corporations. This would be an interest and penalty free extension. For those who are over the thresholds it is unclear whether the entire amount due would be subject to interest and penalties or just that amount over the threshold. It is also not clear whether the filing extension would apply to those who owe taxes in excess of the cut-off amount.
Mnuchin made no statement regarding the postponement of deadlines for payment of quarterly estimated taxes or payroll taxes such as Form 941, or federal tax deposits required to be made many businesses weekly.
Note that there is already an extended due date of October 15, 2020 for filing the 2019 Foreign Bank Account Report (FBAR). This does not require the filing of a specific request for an extension.
Are installment agreement payments for overdue taxes suspended?
An IRS FAQ which addresses disaster relief in general, states that installment payments that become due will be suspended during the period of disaster of relief, but that interest and penalties will continue to accrue. Our tax attorneys are advising that until the IRS makes an announcement covering this topic that taxpayers on installment agreements continue to make payments. If doing so would create a genuine hardship, then we are contacting the IRS to negotiate extensions. We are also pointing out to our clients that if they can afford to continue payments it may be best to do so to avoid accruing additional interest and penalties.
What About California Income Taxes?
The California Franchise Tax Board (FTB) is moving more quickly to provide extensions with an announcement last Friday that taxpayers “affected” by Covid-19 will be granted relief including moving the various tax filing and payment deadlines that occur on March 15, 2020 through June 15, 2020. This includes:
- Partnerships and LLCs who are taxed as partnerships whose tax returns are due on March 15 now have a 90-day extension to file and pay by June 15.
- Individual filers whose tax returns are due on April 15 now have a 60-day extension to file and pay by June 15.
- Quarterly estimated tax payments due on April 15 now have a 60-day extension to pay by June 15.
Many believe that the FTB will conform to any more lenient deadlines announced by the IRS.
Here at Brager Tax Law Group we are still working to resolve our clients’ tax problems, and remain open for business. We are, however, restricting in-person meetings, and expanding the existing capabilities of our employees to work from home.