Tax Alert: Deferring Tax Payments Due to COVID-19
Yesterday, the United States Department of Treasury (U.S. Treasury) released further information regarding their response to the COVID-19 health crisis; specifically, the impact to this year’s tax filing deadline. Take a moment to review the information provided below from the U.S. Treasury. Should you have questions or need advice, contact our tax professionals via phone or by email at IRShelp@mjlm.com. You can also follow us online on LinkedIn, Twitter, and Facebook for the latest updates.
Update from U.S. Treasury – March 18, 2020
Individual taxpayers can defer paying up to $1 million of federal income and self-employment taxes for 90 days without penalties or interest. The $1 million cap is per tax return regardless of the filing status (single filer or a married couple) of the return.
Corporations can defer paying up to $10 million of federal income taxes for 90 days without penalties or interest. The deferral is up to $10 Million dollar for each consolidated group or for each C-Corporation.
There has been no change to the tax return filing deadlines at this time.
Individuals and corporations would still need to file their tax returns (or request formal extensions to file) by April 15, 2020. However, they would not have to pay anything with those returns/extensions until July 15, 2020.
This 90-day payment deferral period would defer those payment due dates from April 15, 2020, to July 15, 2020. If the taxpayer exceeds these limits ($1 million for individuals or $10 million for corporations), then the excess will accrue interest and penalties beginning April 15, 2020. If the taxpayer does not make their postponed payment by July 15, 2020, then interest and penalties will begin accruing July 16, 2020. The IRS notice specifically says it does not include any other taxes other than those specifically enumerated in the notice.
The relief deferment applies solely with respect to federal income tax payments, including self-employment tax, due on April 15, 2020 for the 2019 tax year and estimated income tax payments due on April 15 for the 2020 tax year. There is no mention of the 2Q estimate in the IRS notice. Presumably, 2Q estimates are still due on June 15, 2020 (normal due date). Additionally, the notice specifically excludes payment of any other type of Federal tax, or filing of any tax return or information return that is not specifically enumerated in the notice.
We are monitoring state reactions to the Internal Revenue Service (IRS) payment deferral. It is likely many states will follow the lead of the IRS, but we will continue to keep you informed as the situation develops.