Delay of Tax Payments – What You Need to Know Now
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As we first reported in a March 13, 2020 update, the Administration and Congressional leaders were negotiating an economic stimulus package that was expected to include an extension of the April 15 tax deadline.
On the afternoon of Tuesday, March 17, Treasury Secretary Steven Mnuchin announced that the Treasury and IRS have agreed to a delay in the date to make income tax payments, but NOT a delay in the tax return filing deadline.
What the Delay Means
Mnuchin declared a 90 day automatic payment delay until July 15 for the following income tax payments otherwise due on April 15:
- Individuals (including self-employed) – defer up to $1 million in taxes due
- Corporations – defer up to $10 million in taxes due
- All entities other than C-Corporations (including trusts and estates) – defer up to $1 million in taxes due
- First quarter estimated tax payments for tax year 2020
It is important to note that only the Federal income tax payment date has been delayed NOT the tax return filing date or other federal tax payments.
Without further Treasury and IRS policy changes, the due date for 2019 individual income tax returns is still April 15. Taxpayers not able to file their return by April 15 should consider filing for a six-month extension of time to file. This is important because although the policy change for tax payments eliminates late payment penalties until July 15, it does not eliminate late filing penalties, which can be more costly.
It is also important to note that this extension only applies to federal tax payments. While some states – including Maryland – have indicated they will follow the IRS if the tax return due date is extended, it is uncertain how most states will react.
Obviously, there are many more details to be worked out by both the IRS and state taxing authorities regarding their approaches to this difficult situation. We will keep providing you updates as soon as those additional details become available.
Other potential stimulus plans being considered
In addition to the federal tax payment relief, other legislative and administrative efforts are being considered.
The House of Representatives has passed the Families First Coronavirus Response Act that included two payroll tax credits to help employers cover wages paid to employees needing time off due to the virus. The legislation has moved to the Senate, but it is not clear whether the Senate will modify the bill and therefore send it back to the House.
In addition, the White House proposed an $850 billion stimulus package in an attempt to provide liquidity to the economy and affected industries. The proposal includes a wide range of initiatives including direct cash payments to U.S. citizens, aid for the airline industry and loans to help small businesses stay afloat.
We will keep you posted regarding the status of both stimulus proposals.
Please contact your Herbein team professional to stay abreast of these developments, or email us at firstname.lastname@example.org.