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Lane Keeter, CPA

Partner: Tax Consulting, Estate Planning, and Heber Springs Managing Partner

Treasury Extends Tax Payment Deadline

Within the last few days, the US Treasury announced it would extend the tax payment deadline for taxes due on April 15, 2020 to July 15, 2020. Yesterday, more helpful guidance was issued on this extension.

What we know:

  • The relief is available for income tax payments due April 15, 2020. This includes federal estimated tax payments due April 15, 2020. Such payments will not be subject to interest or penalty if paid on or before the July 15th deadline.
  • Non-corporate taxpayers can defer up to $1,000,000 of tax liability until July 15th; this limit is a combined limit of both 2019 and 1st quarter 2020 tax payments combined.
  • For individuals, the amount of the deferred tax payment is $1,000,000 regardless of filing status. Therefore, a tax deferment amount is the same for a single individual and for married individuals filing a joint return. 
  • The deferment includes payments of tax on self-employed income.
  • Corporations can defer up to $10,000,000 of tax liability until July 15th; just as with individual taxpayers, this limit is a combined limit of both 2019 and 1st quarter 2020 tax combined.
  • The extension of time to pay includes only income tax payments. It does not cover an extension of time to actually file your income tax returns.

 

What we don’t know:

  • The notice did not address whether married individuals who file separate returns would each receive a $1,000,000 deferment.
  • Because the notice did NOT include an extension of time to file, if someone files their tax return after April 15th without filing for an extension of time to file (making it technically late), we do not know if the late filing penalty still applies even if payment is made on or before July 15th.
  • State filing and payment obligations are not covered by the IRS notice. Each state must address its own filing and payment requirements. Our home state of Arkansas has not yet issued any statement regarding this. As of this writing, these states have taken the following actions:
    • The Michigan, Colorado, Georgia, Maryland, Massachusetts, Ohio, and Oregon treasury departments have stated they will mirror the IRS, but as yet there are no official rulings to that effect.
    • California has extended filings and payments until June 15th, including quarterly estimated tax payments.
    • Connecticut has extended business returns until June 15th and individual returns until July 15th.
    • South Carolina has extended filings and payments until June 1, 2020 for both individuals and corporations, but has not addressed quarterly estimates.

 

What does all of this mean?

While this is certainly welcome relief, there are still many unanswered questions and logistical issues.

For one thing, with so many businesses having closed or will be closing, and with individuals “sheltering in place”, it is unclear how taxpayers and the tax preparer community are going to be able to work together effectively to get returns prepared and filed by the April 15th deadline. Efforts are still being made to convince Treasury to also extend the return filing due date to ease this problem.

One thing is for sure, if you expect to owe taxes in excess of the amounts shown above, you should try to pay those by April 15th to avoid potential penalties and interest on the underpayment.

As for EGP, as we stated in our email last Monday, we are still diligently working to serve you and have made plans that will allow us to continue to do so as this situation unfolds. We encourage you, if you are able, to continue to provide us your tax information. This will greatly enhance our ability to get your returns done as soon as possible.

Please be aware, however, that given the likelihood of office closures and other disruptions, our plan at this time is to file for the automatic six month extension of time to file returns for all clients whose returns are still due. This will insure that no one inadvertently incurs the late filing penalty discussed above, and that all clients get the care and attention needed and deserved. It will also allow our team members the flexibility needed to care for themselves and their families well during this challenging time.

Further, we also feel that at this critical economic time, the right thing to do is to concentrate first on clients expecting a refund. The sooner we can get those clients filed, the sooner those monies can get back to work boosting our economy. The payment deferral until July 15th gives us the flexibility to do this without putting our tax owing clients in jeopardy of owing interest and penalty. We will always continue to push to get as many tax returns as possible done as quickly as possible.

We at EGP are committed to helping you, our clients and loyal friends, not just survive but thrive during these uncertain times. As we said before, together we will weather the storm!

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