COVID-19 ALERT

IRS EXTENDS TAX DEADLINES FROM APRIL 15 TO JULY 15

Last Friday, March 20, 2020, the IRS announced that the due date for filing Federal income tax returns and making Federal income tax payments due April 15, 2020, is automatically postponed to July 15, 2020.

These extensions are automatic, and taxpayers do not need to file Forms 4868 or 7004 to obtain an extension. There is no limitation on the amount of the payment that may be postponed.

This temporary relief for taxpayers was granted by the IRS after President Trump issued an emergency declaration under the Stafford Act in response to the ongoing COVID-19 pandemic and instructed the Secretary of the Treasury to provide relief from tax deadlines for American taxpayers adversely affected by the COVID-19   emergency.

Earlier in the week, the IRS had granted a limited three month deferral of up to $1 million in tax payments which had been incorrectly reported by some media outlets as also extending the April 15 filing deadline. This new IRS notice (Notice 2020-18) supersedes the earlier notice and both extends the filing deadline until July 15 and removes the $1 million limitation.

The relief provided this week is available solely with respect to Federal income tax payments (including payments of tax on self-employment income) and Federal income tax returns due on April 15, 2020, in respect of an affected taxpayer’s 2019 taxable year, and Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an affected taxpayer’s 2020 taxable year.

No extension is provided for the payment or deposit of any other type of Federal tax, or for the filing of any Federal information return.

As a result of this relief, the period from April 15, 2020 to July 15, 2020 will be disregarded in the calculation of any interest, penalty or addition to tax for the failure to file the Federal income tax returns or pay the Federal income taxes postponed thereby.

Small business owners are anxiously waiting to see whether or not the stimulus package under consideration by Congress (the proposed CARES Act) provides additional relief to small businesses, such as a massive expansion of the Small Business Administration 7(a) loan program. In the meantime, small business owners that have “pass-through” entities such as S-corporations, limited liability companies and partnerships may postpone tax payments due on April 15 and use that money as what amounts to an interest-free short-term loan from the Federal Government providing liquidity during the COVID-19   emergency. Note that this relief is not tax forgiveness, just a three month postponement of the obligation to pay the taxes that are subject of the notice.

We will continue to provide updates to our clients and friends regarding important COVID-19   legislation that affects small businesses. If you have any questions regarding the foregoing, please contact Pete Cripps at pcripps@sgrvlaw.com or 215-241-8884