Yesterday IRS and the Department of Treasury announced that taxpayers will be allowed to defer payments related to 2019 tax returns until July 15th, thereby providing 90 extra days to pay additional tax. The amount of tax that can be deferred is capped at $1 million for individuals and $10 million for corporations. The payment extension is part of the effort to curb the economic disruption of the Coronavirus pandemic. It is estimated that the impact of this action will infuse $300 billion into the economy.
Delaying payment requirements will provide businesses and individuals additional time to meet their remaining tax obligations, potentially easing cash flow issues that businesses face as many people stay home and spend less money.
While 2019 tax payments can be deferred, it appears an extension will still be necessary at April 15th if tax returns are not filed. This appears to be counter intuitive given penalties and interest will not be assessed until July 15th.
There is also consideration for delaying estimated quarterly tax payments. The first and second quarterly payments are typically due April 15th and June 15th, respectively. Since these payments are not for 2019, don’t assume they will be covered as part of this deferral. Further speculation suggests that first and second quarter estimated tax payments could be deferred to July 15th as well.
The impact of state tax filings is unclear. Most states that have commented suggest they would follow the Federal guidance. Be sure to understand state requirements where you file as states may have different requirements.
Note if you are receiving a tax refund, it still makes sense to file as soon as possible. The change has no effect on those who have already filed their 2019 tax returns.
The situation is fluid and we continue to monitor these developments to provide additional information as developments occur and are clarified. Please do not hesitate to contact us with any questions you have.