Treasury Secretary Steven Mnuchin announced 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.
This recent announcement raised several questions which we are 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. We are uncertain there will be a waiver of late filing penalties so it would be wise to request an extension of time to file. Secretary Mnuchin stated penalties and interest will not apply to the deferred payment.
- Are estimated tax payments, generally due on April 15 and June 15, subject to waiver and deferred under these caps? Technically, they are 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. We will continue to monitor as it is unclear how states will conform to the federal guidance since it is not as simple as filing an extension.
Many of you have already sent us information to prepare your 2019 tax returns. We will continue to work diligently to complete the work we have on hand and for those who need/want to file sooner than later for refunds, FAFSA, or other necessary reasons.
We are prepared to serve you during these challenging times and appreciate your confidence in us. We will continue to update you with any additional details as they develop.