COVID-19: Your Guide to the 2019 Federal Tax Filing & Payment Extension Published March 18, 2020
UPDATED: The US tax filing deadline has moved to July 15, 2020.
[March 20, 2020, 10:00 a.m. MT]
In light of the rapidly evolving COVID-19 outbreak, we are all faced with a flurry of news that makes it hard to discern the difference between fact and fiction.
On March 17, 2020, during a White House briefing, Treasury Secretary Steven Mnuchin announced changes to the tax filing season. Since then, confusion surfaced around whether this applies to just payment deadlines or both filing and payment deadlines. Many media outlets reported an extension of the tax filing season by 90 days.
It was also unclear whether or not these deferrals applied to business employment taxes or just income taxes for individuals and businesses.
On March 18, 2020, the Treasury Department and IRS announced official guidance that clears up some of the confusion around this filing season and on March 20, 2020, Treasury Secretary Steven Mnuchin announced that they have moved Tax Day from April 15 to July 15, 2020.
Here is our breakdown to help you identify what this relief is, and how it pertains to all of us as taxpayers and commercial lenders:
- This relief applies to Federal income tax payments only. Individuals and businesses must file all returns by July 15, 2020.
- Individuals: Income tax payment deadlines for individual returns, with a due date of April 15, 2020, are being automatically extended until July 15, 2020, for up to $1 million of their 2019 tax due. This payment relief applies to all individual returns, including 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.
- Businesses: For C Corporations, income tax payment deadlines are being automatically extended until July 15, 2020, for up to $10 million of their 2019 tax due.
- A business with employment tax requirements must continue to file and pay on time or be subject to penalties, interest, and collection by the IRS.
- Penalties and interest resume on balances on July 16, 2020.
- Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020.
- Taxpayers can still request a six-month extension to file returns, as they could in any other year.
- This relief pertains to a deferral not a waiver of payment requirements.
- If a business is distressed and unable to pay their required payments, this merely only delays that requirement to July. However, there will be relief in that penalties and interest will not accrue up until July 15th.
Commercial lenders should note that a large number of businesses unable to pay in April will likely be unable to pay after the July extension. We encourage you to be mindful of this risk as you are conducting credit risk assessments over the next few months to ensure that you are getting a full picture of exposure.
Please feel free to contact us if you have any questions about how this change at the IRS will impact your commercial lending business. We are staying up-to-date on all tax-related news, and remain committed to being a source you can trust in these uncertain times.
Please note: There are exceptions to all scenarios presented above and this should not be interpreted as legal advice.