Dear Clients and Friends of the Firm:
You may have heard that Secretary of the Treasury, Steven Mnuchin, tweeted yesterday that a decision has now been made to have
filing deadlines coincide with an earlier IRS announcement this past week that
payment deadlines are due on July 15, 2020 rather than on April 15, 2020. The IRS released late last night official notification of the latest change to filing deadlines. Under this guidance, July 15, 2020 becomes the new filing deadline AND payment deadline without any need to file an extension for federal income tax returns. And this is where words (and details) matter so we were waiting for official guidance. According to the IRS Notice, “
any person with a Federal income tax payment or a Federal income tax return due April 15, 2020, is determined to be affected by the COVID-19 emergency for purposes of the relief.” Also, the term “person” includes an individual, a trust, estate, partnership, association, company, or corporation, as provided in section 7701(a)(1) of the Code. The prior IRS notice earlier last week that dealt only with payment deadlines applying to certain taxpayers with tax liabilities not exceeding a threshold amount (and confused some) simply no longer applies. Instead, the filing deadline and payment deadline applies to all taxpayers. It is noteworthy that C corporations, regardless of the amount of earnings, were also granted an extension to pay their liabilities until July 15, 2020. What that means is that you will automatically avoid federal interest and penalties on the taxes paid by July 15, 2020. Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. However, a strict read suggests that the only returns that are affected are those due on April 15, 2020. That would mean that returns that were due March 16, 2020, as well as those returns due on May 15, 2020, are not included in the relief.
Some have wondered whether this relief applies to self-employment tax (it does) and how it applies to estimated tax payments. Specifically, the relief also includes estimated tax payments for the tax year 2020 that are due on April 15, 2020. Please note that there is a second estimated tax payment due during the deferral - the one due June 15, 2020 - but the IRS has not indicated that amount is eligible for deferral. The Notice and subsequent guidance continue to specifically reference estimated payments “that are due on April 15, 2020.” We also believe that those who are eligible to make a deductible IRA contribution have until July 15, 2020 to make that contribution. The Treasury Department also reminded taxpayers that if they have an expected refund it is best to file earlier in order to receive a refund check as soon as possible and help stimulate this challenged economy right now.
State income tax returns that were due for California and many other states on April 15, 2020 have similarly been postponed. But there still exists some possible differences in a few states so it is best to check with us first before making a decision about multi-state returns that may be due. These remaining states will probably still come on board with the new guidelines soon.
We hope these few take-aways from the official guidance are helpful. As with any new announcement, we expect further official clarifying details to follow in the next few days. We will communicate those details when we have them. For example, it is still quite possible that a widely bi-partisan Senate bill introduced the day before this latest guidance, that likely prompted the Treasury to take this action -along with heavy lobbying from CPAs - will yet be enacted. If so, all tax year 2020 estimated tax payments may be deferred until October of this year. In the meantime, we will continue with our extra efforts to assist you with your tax preparation and planning needs and guide you in taking the most prudent course of action at this unusual time for our nation, state, communities and families.
Feel free to reach out to us for any clarifications during this trying time. There may be just a few of us at the main office these days, but we are all still very reachable and working hard so that we can get through these challenges together. We remain most grateful to be part of your financial team.
Stay safe and best regards,