The IRS announces a tax deadline extension of 90 days to July 15 interest and penalty-free to help individuals and businesses affected by the coronavirus pandemic.
As Treasury Secretary Steven Mnuchin said Tuesday in the briefing about the coronavirus, individual taxpayers and small businesses can delay paying their income taxes on as much as $1 million for up to 90 days. The sum goes up to $10 million for corporations.
Tax Deadline Extension
It is important to note the IRS hasn’t (to date) extended the deadline to file your taxes. So, you should file by April 15.
Mnuchin said, “We encourage those Americans who can file their taxes, to continue to file their taxes on April 15 because for many Americans you will get tax refunds. We don’t want you to lose out on those tax refunds.”
Even though it is not official yet, the IRS is expected to change the filing date deadline to July 15 also. But until you hear otherwise, make sure to file by April 15. Another important point about the extension is it only applies to the federal government.
To date, the IRS is reporting it has processed over 67.99 million income tax returns as of March 6. And according to the agency, 52.7 million of these filers already have their tax refunds, with an average of $3,012. The IRS expects to process more than 150 million individual returns this year.
The Previous Rules on Extension
Before the change Mnuchin announced, taxpayers could apply for a six-month automatic extension. This meant you could extend your 2019 date until October 15, 2020. However, in order to avoid penalties and interests, you had to pay the required tax amount by the filing due date.
The New Extension
In his speech to the nation from the Oval Office on March 11, President Trump asked the Treasury Department to extend the filing season. His request has now been approved by the Treasury and it is effective immediately.
The goal of the new extension is to help businesses keep their enterprises going at a time when their cashflow is minimal or nonexistent. For small business owners, the 90-day delay can be the difference between staying in business or not. And this is not an exaggeration when it comes to small businesses.
Additionally, the Trump administration is also looking to delay the quarterly April tax payments for up to 180 days. By delaying their estimated taxes for up to two-quarters businesses can address their cash flow problems. The Trump administration is authorizing a total of $300 billion of these tax deferrals.
This will bring the total to $400 billion the executive branch is proposing to lawmakers, which also includes relief for student loan interest payments in addition to the delay of the tax deadlines. The President’s economic advisor said the administration was ready to double the next package to $800 billion.
According to Mnuchin the help to small businesses include options for fast cash loans and expediting loans from the SBA.
State Taxes
The extension announced by Mnuchin only covers the federal government. This means you have to pay your state taxes according to the time tables they currently have in place.
With that said, some states are also implementing their own extensions to address the problems of the outbreak. The amount of time the states are extending varies. Again, make sure to find out what they are.
The American Institute of CPAs has a list of the changing state tax deadline for each state here.
Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming don’t have an income tax. Tennessee and New Hampshire do not tax wages earned.
Coronavirus-related Economic Stimulus
In addition to the extensions, Secretary Mnuchin is also seeking an economic stimulus package of $850 billion or more.
This includes payment to small businesses and critical industries. Mnuchin went on to say the Trump administration wants to provide business interruption payments. The goal is to have these funds in the hands of Americans as fast as possible.
Mnuchin said, “Americans need cash now and the president wants to get cash now. And I mean now, in the next two weeks.”
Image: Whitehouse.gov