IRS and Treasury Offer Guidance on Deferring Tax Payments Amid COVID-19 Outbreak
On Wednesday, the Internal Revenue Service and the Treasury Department offered tax payment relief in response to President Trump’s emergency declaration granting relief amid the coronavirus pandemic.
What is the importance of the guidance?
First, to be clear, the guidance addresses payment relief, not filing relief. The filing due date for individual tax returns (1040) is still 4/15/20. Taxpayers who need an extension must file Form 4868 as per usual.
The guidance permits all individual and other non-corporate tax filers to defer up to $1 million of federal income payments due on April 15 2020, until July 15, 2020, without incurring penalties or interest. This includes self-employment taxes. The guidance also allows corporate taxpayers a similar deferment of up to $10 million of federal income tax payments that would be due on April 15, 2020, until July 15, 2020, without penalties or interest.
Nonetheless, the guidance specifically notes that the current relief does not change any other payment or filing deadlines: “No extension is provided in this notice for the payment or deposit of any other type of federal tax, or for the filing of any tax return or information return.”
“Americans should file their tax returns by April 15 because many will receive a refund. Those filing will be able to take advantage of their refunds sooner,” said Treasury Secretary Steven Mnuchin in a statement Wednesday. “This deferment allows those who owe the IRS to defer the payment until July 15 without interest or penalties. Treasury and IRS are ensuring that hard-working Americans and businesses have additional liquidity for the next several months.”
Based off the guidance, projections expect $300 billion of additional liquidity in the economy in the near term. The IRS intends to issue more guidance as needed and continue working with Congress to provide further relief to taxpayers.
While this is a stressful and unprecedented time, be sure to wash your hands and file your returns.