Treasury Secretary Steven Mnuchin stated, during a press conference yesterday, that the IRS will allow taxpayers to defer payments for 2019 tax returns until July 15, subject to certain caps. For individuals, the amount of tax which can be deferred is up to $1 million. Corporations can defer up to $10 million. These limits were selected to provide benefits to small businesses which report income through pass-through entities such as partnerships or S corporations. He indicated that the net impact of this action by the IRS will be to put $300 billion into the economy as another measure to minimize the consequences of the coronavirus pandemic.
Here are some FAQ’s we will be monitoring:
— Is the tax return filing deadline also extended?
While 2019 tax payments will be deferred, it appears that the filing date will remain April 15, 2020, unless an extension is requested. Although Secretary Mnuchin said penalties and interest will not apply to the deferred payment, it would be wise to request an extension of time to file since it is not clear from his statement that there will also be a waiver of late filing penalties. The hope is that this penalty will not apply, particularly given the current circumstances related to the coronavirus.
— Are estimated tax payments, generally due on April 15 and June 15, subject to waiver and deferred under these caps?
They are technically not payments for the 2019 tax year and may not be covered.
— What is the impact on state tax filings?
Most states have been silent as to an extension, and those that had previously commented said they would follow the federal lead. It is unclear how states will conform to the federal guidance since it is not as simple as filing an extension.
We will continue to follow these developments and will provide information on these issues as they are clarified.