March 20, 2020

Taxpayers and business owners received a much needed lifeline this week from the Treasury and IRS in response to the Coronavirus outbreak. Individual taxpayers got a three-month (90 day) extension to pay income taxes they owe for 2019, typically due on April 15th, but will now have until July 15th, 2020.

Specifically, the IRS will waive any interest or penalties due on up to $1 million in taxes owed by individuals, and up to $10 million for corporate filers. As expected, this will also be a huge reprieve for pass-thru entities such as S-Corporations and Limited Liability Companies (LLCs). Business owners that owe taxes on their pass-thru income also have an extra 90 days to pay the taxes up to $1M without interest or penalties. Today, The U.S. government took further action and also extended the tax-filing deadline to July 15, a move meant to give taxpayers extra time to deal with their taxes amid the coronavirus outbreak. Taxpayers now have an extra three months to both file and pay their taxes. “All taxpayers and businesses will have this additional time to file and make payments without interest or penalties,” Treasury Secretary Steven Mnuchin said in a tweet this morning. The announcement came three days after the IRS said that many Americans could defer paying any taxes owed until July 15 but would still have to file their tax returns by April 15. The IRS has not yet issued formal guidelines on today’s change. Those guidelines could detail whether taxpayers will also get more time to make deductible contributions to IRAs or health savings accounts for 2019, for example, as well as whether people who owe other taxes such as gift tax or estate tax get more time. They also could address whether taxpayers can get extensions beyond the new July 15 deadline (and if so, for how long)

Don’t Delay Filing – You might be Due a Refund

Treasury Secretary Steven Mnuchin urged taxpayers at a news conference that those “who can file their taxes to continue to file their taxes on April 15 because for many Americans, you will get tax refunds and we don’t want you to lose out on those tax refunds,” Ironically, taxpayers not claiming refunds is a common problem. In 2019, taxpayers left over $1.4 billion in the hands of the IRS for 2015 because they never filed a tax return. After 3 years of not filing, the government gets to keep those unclaimed refunds. The point is, you could still be due a refund! Thus, don’t take this ‘extension to pay’ as a chance to wait and not file. In fact, according to the IRS, the agency has processed more than 65 million income tax returns this year as of March 6, and of these, 52.7 million filers received tax refunds averaging $3,012.

Check on Your Particular State for it’s Extension Rules

While the federal government is granting taxpayers more time to pay, it doesn’t mean all the states are following suit. For example, North Carolina has issued some reprieve for businesses and late filing penalties that would normally be due March 15, however, not much else yet. California is granting a 60-day extension for tax payments until June 15th without penalties or interest. However, in order to take advantage of this provision, a California citizen must state how they were personally or directly affected by the Coronavirus and include a statement with their tax return. The American Institute of CPAs is keeping a list of states’ tax developments here, and we urge taxpayers to not assume state agencies are going to allow the same 90 day extension as the Federal Government. Furthermore, remember that taxpayers are ultimately responsible for filing and paying their taxes – not their accountant.

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