In the past week, Treasury Secretary Steven Mnuchin announced some changes to the 2019 tax filing deadline. Rumors of an extended tax deadline had been swirling for a few days. Earlier, Mnuchin said he supported extending the deadline beyond April 15 to help provide some relief to taxpayers whose lives and incomes are being impacted by the COVID-19 pandemic.
On March 18, 2020, the IRS officially announced that it’s pushing the due date for making tax payments to July 15, 2020. Two days later, the agency confirmed it was also pushing back the tax filing date 90 days, giving people an additional 90 days to file and pay taxes owed for the 2019 tax year.
While more details are likely forthcoming, this is what they’ve announced so far.
No Extension for March 15 Tax Filing Deadline
Small business filers (and their tax preparers) were hoping for an extension of time to file Form 1065 and Form 1120-S. These are the forms used to file tax returns for partnerships, multimember LLCs, and S corporations.
But there was no official announcement before that deadline, so those businesses still had to file by March 15 or face late filing penalties. These entities had the option of requesting an extension, giving them an additional six months to file a return. However, the deadline to file their tax returns remained March 15, 2020.
Business owners who missed that deadline should try to file as soon as possible to minimize late filing penalties.
90-Day Extension for Tax Returns Due April 15, 2020
Initially, in his March 17, 2020, briefing with reporters, Mnuchin explained that the IRS would allow some taxpayers to defer payments due on that date. However, taxpayers would still need to file their returns by the typical deadline.
The initial decision also set a cap on the amount of payments individuals and married couples filing joint returns could defer. Individuals who owed $1 million or less and corporations that owed $10 million or less for the April 15, 2020, filing deadline could postpone payment of their tax bill by up to 90 days, until July 15, 2020. However, when the Treasury Department decided to extend the filing deadline as well, it removed those caps.
Now, no matter how much you owe, the IRS will not charge late payment penalties or interest as long as you pay what you owe by the new July 15, 2020, deadline.
There’s a second estimated tax payment due during the 90-day deferral window. Second-quarter 2020 tax estimates are due on June 15, 2020. The IRS hasn’t indicated that amount is eligible for deferral, so for now, assume you must make that payment on time. There is a Senate proposal in the works that would extend all estimated tax payments for the 2020 tax year to October 15, 2020, but that bill is still under consideration.
The relief doesn’t extend to the payment or deposit of any other type of federal tax, such as an employer’s payroll tax deposits or excise taxes.
How the 90-Day Tax Payment Extension Impacts You
With only a few weeks left before the regular April 15 filing deadline, many taxpayers have already filed returns and paid the tax owed. In that case, you likely can’t get a refund of the taxes you’ve already paid.
However, if you haven’t yet filed or paid the tax you owe, you have two options.
- Request an Extension. If the pandemic is making it difficult to gather the information needed to file your return, you can request a six-month extension. You may also need to file an extension if you have all of the necessary information but simply aren’t able to file. Individual taxpayers request an extension using Form 4868. Corporations request an extension using Form 7004. The extension pushes your filing deadline back to Oct. 15, 2020, but you still have to pay the tax you owe by July 15, 2020.
- File Your Return. If you have all the information you need to file your return and you’re able to do so, there’s no reason to extend. You can file using online tax software like TurboTax and H&R Block or a qualified tax preparer. File your return as you normally would. If you owe any tax due, you now have an extra 90 days to pay your tax bill if you owe money. If you’re expecting a refund, the IRS says refunds will not be affected. If the IRS owes you a refund, file as soon as possible so you can collect it.
Remember, Mnuchin’s announcement only pertains to federal income tax returns. If you live in a state with a state income tax, it’s up to each state to decide what to do. They may extend the deadline for state income tax returns or leave the deadlines as is. Since most state income tax returns start with your federal return and make adjustments from there, you may have to file your federal return to complete your state return. Check with your department of revenue for state-specific guidance.
The idea of moving the tax deadline back and giving taxpayers more time sounds easy. But it’s one with many complex considerations. The situation is changing rapidly, so keep in touch with your tax preparer. No doubt, they’re watching the situation closely and can provide advice specific to your unique circumstances.
Have you already filed your tax return? How will the 90-day extension impact you?