These have been trying times for all Americans, and truly the whole world as we face a pandemic not seen in our lifetimes. As we band together, while staying apart, the latest move by the Federal government to extend the filing date to July 15th will surely provide relief to individuals and small business owners alike. To help add some clarity to what this means, I have put together a few points to consider.
United States Treasury Secretary Steven Mnuchin announced today that the IRS will extend the deadline to file income tax returns from April 15th to July 15th. The extended deadline was posted to the Secretary’s Twitter feed this morning and follows the IRS’s announcement on Wednesday that taxpayers would have until July 15th to pay their taxes without incurring interest or late payment penalties. This is welcome news for small business owners that make estimated tax payments throughout the year and often have to send large checks to cover the taxes they owe for the previous year.
With the nation’s economy at a standstill due to the unknown duration of the Covid-19 crisis, taxpayers suffering due to the implementation of widespread social distancing measures and cancellations will have the funds they would otherwise have needed to pay their taxes due on April 15th to cover the basic living expenses of their families during the-hopefully-brief duration of this crisis.
Here are five things you should consider about the new deadline:
The new deadline does not mean that you have to wait to file. If you are owed a refund, you should file now. Don’t wait for the new deadline. The sooner you file, the sooner you will receive your refund. But if you do owe taxes with your return, you should take advantage of the extended deadline to help manage cash flow issues caused by the Coronavirus crisis.
It applies to estimated tax payments. The extended July 15th payment deadline applies both to the payment due on your 2019 tax return and the estimated payment due for the first quarter 2020.
The extension is automatic. You do not have to file a request or take any action to take advantage of the new deadline.
It’s still unclear what this extension will mean for those who regularly request an automatic six-month extension. The IRS has not yet issued guidance on this issue. Be advised, however, that the filing extension does not extend the deadline to pay your taxes. Unless the deadline to pay is further extended beyond July 15th, filing an extension will not allow you to delay the payment of your tax bill beyond that date.
States that impose income taxes typically follow the IRS filing deadline. Therefore, I expect that Kentucky and other states will extend their tax filing and payment deadlines to correspond with the new July 15th deadline set by the IRS.
Moving the payment deadline to July 15th is still not enough. Taxpayers impacted by this extension need assurance that the IRS will work with them later if they need help to catch up. As a small business owner myself, I appreciate and welcome the 90-day reprieve to pay the taxes that I owe. But by current estimates, the Covid-19 crisis could stretch well into the summer and many small business owners will have to use the cash otherwise earmarked to pay taxes to pay bills. So what do these taxpayers do on July 15th when the money is gone? The IRS must offer impacted taxpayers further relief from interest and penalties if an installment agreement is needed to pay taxes that are unpaid due to the Covid-19 crisis after July 15th.
This is a challenging time for all of us, as new information becomes available, I will continue to clarify what this means for you. Please be safe, and keep your neighbors and loved ones safe by staying home until this storm passes.