The Treasury Department has announced their plan to extend the April 15th tax deadline by 90 days for taxes owed by individuals and many businesses. Official details have not yet been released, however, based on the announcement it seems many taxpayers will benefit from this extension. We expect more information to be provided shortly. Until that time, here are some key points from the announcement as well as a few points of uncertainty.
What was announced?
- Treasury Secretary Steven Mnuchin announced his department is pushing back the April 15th deadline to pay taxes owed by 90 days.
- Individuals can defer up to $1,000,000 of tax liability, therefore if you owe less than $1,000,000 you can wait to pay your tax bill until July 15th.
- Corporations can defer up to $10,000,000 of tax liability until July 15th.
What hasn’t been extended…yet?
- This is a Federal Treasury Department decision. While some states have already acted to delay the filing and payment obligations, unless all of them respond with similar relief, some state filings and payments will still be required by April 15th.
- First quarter estimated tax payments are currently still due April 15th. The administration has indicated they are considering delaying the first quarter federal estimate payment as well.
What details are we waiting on?
- The announcement was unclear as to what is required from individuals owing more than $1,000,000 or corporations owing more than $10,000,000.
- At this time, it seems as though taxpayers are required to file by April 15th and this is merely an extension of time to pay taxes owed. This clarification is especially important for taxpayers who have certain information reporting included in their filings with steep late-filing/failure to file penalties.
What else is being discussed?
- It appears that a stimulus package that could approach $1 trillion is on the verge of passage. It could possibly include the following:
- Subsidy checks sent to a large segment of the taxpaying U.S. The amounts are not set, but could be up to $1,000 per person. It is being reported that the checks will be sent out or paid through direct deposit where applicable on April 6th and May 18th.
- A $300 billion aid package to small business in the form of a “Business Interruption Loan” program would provide loans for business to make payroll for employees. The loans would be made through private banking institutions and the terms will be set by the Treasury Department. It is possible that one probable stipulation is that employees have to continue to receive payment for as long as 8 weeks.
More to come on all of the above as we get reliable information and legislations are signed into law.
Good health to you all,
Clint Pugh
Managing Partner
UPDATE:
3/18/20- 5:00 p.m.
The IRS has released an update to some of the information that we received yesterday.
Here is what we now know with clarity:
- Tax periods that are included in the deferment of payment include both 2019 remaining taxes owed and April 15, 2020 estimated payments of 2020 taxes due.
- Individual taxpayers may defer payment on up to 1 million dollars of taxes due from the above noted tax periods, and the amount is the same regardless of filing status.
- Corporations may defer payment of up to 10 million dollars of taxes due for the same tax periods.
- IRS has labeled the deferred taxes due as “Applicable Postponed Payment Amounts”. Presumably, so that they can track these and make sure to charge interest and penalties for any taxes not paid in a timely fashion that does not fall under this program.
- Tax returns, or an extension of time to file is still due on April 15. However, you do not have to file your return to gain access to the postponement.
Our Observations:
Given the way this is structured, there will be no reason that everyone will not want to take advantage of the deferment, beyond just personal preference. In all essential respects, it is like moving the deadline back 90 days.
Please contact a Saville team member for more information.