Posted by Flynn Financial Group Inc

Tax Guidance Issued by the IRS on Tax Payment Deferrals

Tax Guidance Issued by the IRS on Tax Payment Deferrals

The United States’ increasing number of confirmed COVID-19 cases has become alarming which led to the action taken by the federal government - reducing the impact on taxpayers. The tax filing season has been pushed to July 15, 2020, as specifically announced by the Internal Revenue Service (IRS).

Treasury Secretary Steven Mnuchin tweeted that official guidance has been issued by the IRS on the last 20th of March. His tweet was also retweeted by the IRS. The guidance clearly stipulates that the due date for filing tax returns and paying for taxes has been extended from April 15 to July 15.

To read the whole guidance, download it as a PDF here.

On March 13, 2020, the President of the United States issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act as stated in the guidance. This was in response to the Coronavirus Disease 2019 (COVID-19) pandemic that is currently going on in the country. The Emergency Declaration permits the Secretary of the Treasury to provide relief from tax deadlines to American taxpayers who have been badly affected by the COVID-19 emergency, as appropriate, pursuant to 26 USC. 7508A (a).”

The Treasury announced that the due date for filing federal income tax returns and paying for federal income tax as a result. They will be postponed automatically to July 15, 2020. Filing for an extension is no longer necessary.

It’s important to pay attention to the details of these announcements since the notice says, any person with payment for federal income tax or a return for federal income tax due April 15, 2020, is affected by the pandemic for purposes of the relief. Keep in mind that the term “person” also refers to an individual, a trust, estate, partnership, association, company, or corporation, as stated in section 7701(a)(1) of the Code.

The only returns that area affected as suggested by a strict read are those due on April 15, 2020. Returns that were due March 16, 2020, as well as those returns with a May 15, 2020, due date, are therefore not included in the relief.

Do you also remember those caps? The individual relief of $1,000,000 and for corporations amounting to $10,000,000? They no longer exist. The amount of the payment that can be deferred is unlimited.

This only means interest and penalties on the taxes paid by July 15, 2020, are automatically avoided by taxpayers. The accrual of penalties and interest will start on any remaining taxes owed as of July 16, 2020.

Only federal income tax payments and federal income tax returns are the only ones that can take advantage of this relief. The same thing applies for self-employment income tax for the 2019 taxable year, and payments on federal estimated income tax due on April 15, 2020, for the 2020 taxable year.

A bill under consideration proposed by the Senate would extend all estimated payments for 2020 to October 15, 2020.

Unfortunately, the relief doesn’t apply to any other taxes. This means that extensions will not be automatic for any other type of federal tax or the filing of any federal information return.

You may find a lot of guidance and articles on the internet but this article should be enough to help you understand this new relief. 

Don’t forget that this new guidance replaces IRS Notice 2020-17. Stay updated by consulting a tax professional who can help you clarify and further explain the guidance to you. Depending on where you live, you might want to ask your tax advisor for the tax relief available in your state.

The IRS expects the guidance to bring in approximately $300 billion of additional liquidity in the country’s economy in the near term. More guidance is being planned by the IRS and the Treasury to be released as needed. They also will continue working with Congress, on the basis of bipartisan, on legislation for taxpayers to receive further relief. 

It is best to turn to a tax preparer who can file your tax return as an individual or business owner as tax filing deadlines are fast approaching. It may not be easy for you to make calculations based on your own data and information and given the current environment, asking for the help of a professional is highly recommended.

Flynn Financial Group Inc
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