News from the IRS: Tax Filing and Payment Relief as a Result of COVID-19
The IRS is stepping in to help taxpayers as a result of the pandemic caused by the COVID-19 virus1. To the relief of many, the due date for 2019 federal tax filing, and payment of any income taxes due, is now July 15, 2020. This extension also applies to any first-quarter 2020 estimated income-tax payments. The details of this extension are in IRS Notice 2020-18, which now supersedes Notice 2020-17.
The global pandemic caused by the COVID-19 virus has created liquidity challenges. As most taxpayers are well aware, the IRS is not very forgiving when a payment is missed. In the current economically stressed environment, some taxpayers were facing a difficult choice—pay for the mortgage, rent, and/or other necessary expenses, or pay the IRS. The 90-day delay for tax filing and payment of income taxes due allows those funds to be available in the short term.
How does the IRS extension work?
In the Notice, the IRS extends the due date for 2019 federal tax filing and payment of 2019 income taxes, plus first quarter 2020 estimated income taxes, to July 15, 2020. Taxpayers who file their income tax return or request an extension, and make income-tax payments on or before July 15, 2020 will not begin to accrue penalties and interest until July 16, 2020.
At this time, there is no additional form or notice required for those filing between April 15, 2020, and July 15, 2020.
Who is eligible for the extension? How much of their tax bill is covered?
- Individuals, including self-employed individuals
- Entities, such as trusts or estates
- C Corporations
In a new release on March 21, 2020, the IRS announced that the Notices cover any income-tax liability amount. This removed the earlier caps on payments.
Alert: – State, county, and municipal tax-payment deadlines may not change!
Clients should check with their states and local tax jurisdictions. And remember that states and other local jurisdictions may have different rules for tax-filing extensions as well.
This information is important to both financial professionals and their clients. A quick update can benefit many clients, especially small-business owners. This also might be a great time to help a client address other concerns, such as having a floor under their retirement savings accounts.
For additional information about IRS Notices 2020-17 and 2020-18, and the 90-day extension, please contact the Retirement Strategies Group at (800) 722-2333, or email us at RSG@PacificLife.com.
1The common term used for the SARS-CoV-19 virus, a betacoronavirus similar to the SARS-type virus.
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