Update 12:00 p.m. March 21, 2020
You may have heard that the Secretary of the Treasury moved the April 15 filing date to July 15 for 2020. Let’s talk about what this means for your tax filings that ordinarily would be in process right now.
- Yes, your federal tax return for 2019 is now due July 15, 2020. No interest or penalty will apply during that period.
- North Carolina is following that rule, but North Carolina cannot waive interest at 5% under state law.
- Other states may or may not follow that rule. We are following that and as the news develops.
- If you ordinarily pay a first-quarter estimated tax payment due April 15, that is deferred until July 15, 2020.
We are relaxing the long busy season hours that our staff works with this change in the deadline. If you require that your tax work is expedited before July 15, please let us know and we will prioritize it.
If we have already completed your tax work, and you are due a refund – please file as soon as possible to get your money back.
If you have already picked up your tax work and you owe money, there is now no reason to pay the balance before July 15 but it is still good to get your return filed. Be sure to check with us on each separate state for their rules.
Update 4:45 p.m. March 18, 2020
On Wednesday, March 18, 2020, the IRS released Notice 2020-17 which details exactly how the April 15, 2020, Federal payment relief program will work. This initiative was announced in a news conference by the Secretary of the Treasury, but now we have specifics.
Here are some key points from the Notice. See the full IRS announcement here.
- Federal income tax payments due 4/15/2020 are deferred until 7/15/2020. Eligible amounts are income tax payments
- Due by individuals, trusts, or estates of up to $1 million.
- Due by corporations of up to $10 million. Controlled groups of corporations get one $10 million to share.
- This is an extension of payment ONLY. Not of filing. Taxpayers owing income tax on April 15, 2020, for 2019 still need to file an income tax return (form 1040, 1041, or 1120), or extension of time to file form (4868 or 7004). The relief from payment is not a relief from filing.
- The relief includes the 2020 first quarter estimated tax payment ordinarily due April 15, 2020.
- No other types of tax payments due are included!
- No payment of tax due between those dates (like the 2020 second quarter estimated tax on June 15, 2020) are included.
- No interest or penalty will apply to the period of April 15, 2020, to July 15, 2020, up to the amounts due above. If the amount due on April 15, 2020, is not paid by July 15, 2020, interest and/or penalty will restart on July 16, 2020.
- If the taxpayer owes more than the maximum deferred tax above, interest and/or penalty will continue to accrue between Apri l15, 2020 and July 15, 2020, on the amount in excess.
- No action is required to get this relief. It will automatically be granted.
For true relief for our clients, the states must follow suit. We will watch for that.
Published 9:00 a.m. March 18, 2020
As you have heard on the news, there is much discussion from the President and other Administration officials about the need for April 15 filing relief. DMJ’s Director of Tax Services, Milton Howell, CPA, CSEP, shares a few key facts based on what we know right now.
- I do not know the details, and the details are key. Nothing has been put in writing from the IRS, the Treasury Department, or the White House. As of this writing (9 am on 3/18/2020), no plans have been released to the press or published on their web sites. All I have is what has been said by Administration officials in a press conference.
- The filing deadline has not been extended – only the payment deadline. So those clients owing money with their 2019 tax return can send in their tax return or extension without payment, and no additional interest or penalty will be due if paid by July 15. For individuals, this is for those owing up to $1 million only. If you owe more than $1 million, no part of your balance due is extended.
- This includes those who have completed their tax return already but have not sent it in because they owe tax. Apparently, you can send it in without payment and then pay by July 15.
- If you are due a refund, you should proceed as normal to get your money back as soon as you can.
- Other payments. We do not know how this impacts other payments due April 15. For example –
- The President has talked many times about a payroll tax holiday. This is not the same thing. Payroll taxes continue to be due as before as no holiday has been enacted.
- We do not know how this impacts trusts and other taxpayers with tax due on April 15.
- We do not know how this impacts individual estimated income taxes for 2020. The first quarterly payment is normally due 4/15/2020, and the second one is due 6/15/2020. Are those delayed until 7/15/2020? We simply have no idea at this time.
- States. Most of our clients file NC state returns, and as of this writing, NC has not extended similar relief. Legally, I cannot speak to whether the Governor has that authority in NC but I doubt it – it seems that this action would require legislation by the General Assembly. So right now, I would tell someone who needs an extension and expects to owe, that we will still need to calculate the amount due because the state extension will require payment while federal will not.
- Most other states are in a similar situation – they have not acted yet. Only three states, at this writing have issued relief are California, Maryland, and Connecticut.
Keep tuned in – we will let you know how this situation develops.