Because of the ongoing financial turmoil, the IRS is cutting some slack to a great many individuals and businesses. They now have until July 15 to pay any federal income taxes they owe. The delay is available to individuals who owe $1 million or less and corporations that owe $10 million or less. The IRS will not charge interest or penalties for this delay.
This could be an enormous boon to those who owe money.
It’s never easy finding the cash to write the government a check, but it’s especially difficult now, as the coronavirus has curtailed so many activities: Many businesses and employees are seeing a drastic drop in income, and decimated stock portfolios may force some investors to sell at a loss to cover tax bills. Hopefully, in three months, taxpayers will be in a better position to pay.
However, this is only a delay in payment, not filing. Taxpayers must still meet the April 15 filing deadline unless they take advantage of the already-existing system for requesting a delay in filing (see below). For those who have already filed and are expecting a refund, nothing has changed; this does not mean they will have to wait any additional time for their refunds.
Delay only affects federal returns, not state
However, some states are offering similar relief. The American Institute of CPAs has created a list of what each state is doing. Note that this is a fast-moving story, so even if your state has nothing planned as of today, that may change by tomorrow.
Getting Into Details
This tax postponement plan began as an oral promise, but the IRS has started to issue more details and guidance in its e-newsletter:
- The individual taxpayer relief includes all individual returns, includes self-employed individuals, and all entities other than C-corporations, such as trusts or estates.
- The IRS will automatically provide this relief to taxpayers. Taxpayers do not need to file any additional forms or call the IRS to qualify for this relief.
- For C Corporations, income tax payment deadlines are being automatically extended until July 15, 2020, for up to $10 million.
- This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020.
- Those who file for extensions using Form 4868 or Form 7004 by April 15 are eligible for the July 15 extension.
- The relief only applies to federal income tax, not to any other kind of federal tax.
Since this is a very new program, Garofalo Law Group will be closely monitoring the situation for additional official guidance. Call us at (312) 753-6000 to update your estate plan today.