This COVID-19 motivated federal income tax payment extension allows individual and corporate taxpayers 90 days to remit tax payments otherwise due April 15.

On March 17, the Treasury Department and the IRS announced an extension to July 15 for the payment of federal income taxes. However, the April 15 tax filing deadline remains unchanged. Taxpayers who timely file an extension application by April 15 will be permitted an automatic six-month extension to October 15, 2020, to file.

Subject to certain limitations and guidance, this COVID-19 motivated federal income tax payment extension allows individual and corporate taxpayers 90 days to remit tax payments otherwise due April 15, including first quarter 2020 estimated tax payments, with the filing of 2019 income tax returns. While we await additional guidance from the Treasury and the IRS, here’s what we know:

• This extension applies to both individual and corporations with payments due April 15.
• Individuals can defer up to $1 million in taxes due.
• Corporations can defer up to $10 million in taxes due.

Please note that this payment extension applies to federal income tax returns. The extension does not automatically apply to your state and local tax filing and tax payment deadline, although it is expected that most states will likely follow suit. TAG’s State and Local Tax Group has built and will maintain a state and local matrix, so please feel free to contact us for specific details.

Additionally, at the moment, the right to defer payment of tax applies only to federal income taxes related to the 2019 tax return and first quarter 2020 estimated tax installments. It does not apply to other taxes such as payroll taxes, gift taxes, estate taxes or excise taxes.

Pleasingly, the IRS has established a Coronavirus Tax Relief webpage focused on steps to help taxpayers, businesses and others affected by the coronavirus. Separate from helpful information on the virus and links to the Centers for Disease Control and Prevention (CDC), this page includes news releases and guidance on high deductible health plans and expenses related to COVID-19 costs, recent remarks, testimony and statements from Treasury Secretary Steven T. Mnuchin.

TAG’s Perspective

We believe the tax payment deferral is helpful, but the government fell short by not extending the tax filing deadline. For some taxpayers, individuals and businesses alike, preparing tax returns in this environment is very challenging. Treasury still has time to provide tax filing relief and we believe they should extend the April 15 tax filing deadline. With that said, we continue to recommend to our clients that they submit to us their tax material to either file sooner to secure refunds, implement last minute 2019 tax saving strategies or project 2019 and first quarter 2020 tax obligations to assist with cash flow management and planning.

For More Information

If you would like more information, contact the practitioner with whom you are in regular contact or any of the practitioners in the Tax Accounting Group. For information about other pertinent tax topics, please visit our publications page.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.