On Tuesday evening our tax lawyers sent out an announcement discussing some of the tax filing and payment implications of the Covid-19 virus. We indicated that Secretary of Treasury Mnuchin had announced payment and filing extensions for the 2019 income tax returns.
Mnuchin was quoted as saying “We encourage those Americans who can file their taxes to continue to file their taxes on April 15,” Mnuchin said. “Because for many Americans, you will get tax refunds.”
We took that to mean that the filing deadline as well as the payment deadline was extended. This is the problem with tax guidance by Tweet and press conference. On Wednesday morning the IRS issued an announcement which states that there is no filing extension.
There is only a payment extension. Thus, any individual taxpayer who owes federal income taxes up to 1 million dollars on her 2019 tax return will have an extension to pay those taxes through and including July 15, 2020. This ceiling is the same without regard to a taxpayer’s filing status. C Corporations which owe up to 10 million dollars will also have an extension to pay. This extension also applies to the estimated tax payment due on April 15th.
No interest or penalties will be due if the tax is paid by July 15th. Interest, penalties, and additions to tax with respect to such postponed Federal income tax payments will begin to accrue on July 16, 2020. In addition, interest, penalties and additions to tax will accrue, without any suspension or deferral, on the amount of any Federal income tax payments in excess of the ceiling amount due but not paid by April 15, 2020.
Taxpayers who need an extension to file must request an extension as usual.
State of California Income Taxes (FTB)
Last night the Franchise Tax Board (FTB) announced that filing AND payment deadlines have been extended to July 15th for 2019 tax returns, and first AND second quarter estimated tax payments. A chart showing all of the details is on the FTB’s website.
As far as FTB leniency in general goes, we have already run into one situation where the FTB is refusing to give a taxpayer who has a large installment payment due on April 6th an extension even though the taxpayer is directly negatively impacted by the current ban on large gatherings.
California Department of Tax and Fee Administration (CDTFA)
The CDTFA (or as our sales tax lawyers like to call it the agency formerly known as the Board of Equalization) has announced that it has the authority to assist individuals and businesses impacted by complying with a state or local public health official’s imposition or recommendation of social distancing measures related to COVID-19. The announcement states that this assistance This assistance includes granting extensions for filing returns and making payments, relief from interest and penalties, and filing a claim for refund. The authority will apparently self-destruct on May 11th, but presumably if the state of emergency continues the authority will be extended. Unlike the IRS the relief is not automatic but must be requested in writing, or via email.