The coronavirus crisis has broken out just as many firms and individuals are completing returns for the 2019 taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. year. In response, the U.S. Treasury Department has pushed the April 15 tax payment deadline to July 15. However, taxpayers still have to file their tax returns by the usual April 15 deadline. Lawmakers, business owners, and tax policy experts are concerned that delaying one deadline but leaving the other in place could cause confusion for taxpayers.
The new Internal Revenue Service (IRS)The Internal Revenue Service (IRS) is part of the U.S. Department of the Treasury and is responsible for enforcing and administering federal tax laws, processing tax returns, performing audits, and offering assistance for American taxpayers. guidance postponed the April 15 tax payment deadline and waived interest and penalties for individuals who owe $1 million or less and corporations that owe $10 million or less. This means that taxpayers still have to file their taxes by the regular April 15 deadline, but if they have a balance due to the IRS (below the amounts outlined above), they have an extra 90 days before having to make their payment. Delaying payments will be helpful for both individuals and businesses that may be experiencing economic hardship due to the public health emergency.
While delaying payments is good, many are afraid that leaving the April 15 filing deadline in place could lead to confusion and hardship for taxpayers. Will they mistake which tax-related deadline changed? Will they misunderstand what the filing change means for their own tax situation? Complicating matters, social distancing practices have led to many tax preparation offices and clinics being closed or only taking clients remotely. This could pose difficulties for taxpayers who still need to meet with their tax preparers before filing their returns and, in some cases, asking for extensions.
Responding to this potential for confusion, Senators John Thune (R-SD), Steve Daines (R-MT), and Angus King (I-ME) have introduced legislation to also extend the tax filing deadline to July 15, to match the new tax payment deadline. House Ways and Means Chairman Richard Neal (D-MA) has written a letter to the Treasury Department requesting the same:
“I believe that having two separate deadlines—one for filing and one for payment—will potentially create a great deal of confusion for taxpayers accustomed to having only one deadline. Accordingly, I respectfully request that you immediately defer the deadline for all filing and tax payment obligations until July 15, 2020.”
Another point of consideration is how the delays impact estimated quarterly tax payments made by businesses. As my colleague Garrett Watson explains: Independent contractors, gig economy workers, and firms are also looking ahead to quarter 1 and quarter 2 estimated tax payments on April 15 and June 15, respectively. Currently, the IRS has delayed the deadline for quarter 1 payments, which are now due July 15 instead of April 15. However, this means that quarter 2 payments, regularly due June 15, would be due before quarter 1 payments. Policymakers should consider delaying quarter 2 payments of estimated taxes as part of any additional filing decisions.
Whether the legislation to delay the tax filing deadline successfully passes through the Senate and House and makes it to the President’s desk, or whether the Treasury Department uses its special authority to delay the filing deadline on its own, remains to be seen. Providing a clear and simple delay to both the tax filing and tax payment deadlines would help reduce the burden on taxpayers and mitigate unnecessary confusion regarding taxes during the coronavirus crisis.
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