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By:  Beverly Winstead, Esq.

The Treasury Department and Internal Revenue Service announced Friday, March 20, that the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020. 

Here is what you need to know

  • Individuals who owe the IRS money will be able to defer up to $1 million in payments for 90 days without interest or penalties. The new effective payment due date is July 15, 2020.
  • Corporations who owe the IRS money will be able to defer up to $10 million in payments for the same 90 days without interest or penalties.
  • The delay also includes first quarter, 2020 estimated tax payments for individuals. These payments are now due on or before July 15, 2020. This estimated payment delay DOES NOT apply to corporations.

What it means for you

While the federal government grants you an additional 3 months to pay your 2019 taxes, you may wish to file an extension or still file your tax return by April 15. Here are some thoughts on different situations.

You anticipate a refund. For now, the IRS is still issuing refunds as normal. For e-filers, refunds are often sent in less than three weeks. If the IRS is forced to scale back its operations for safety reasons, your refund could be delayed.

A better solution: an extension. If you cannot complete your tax return by April 15, consider filing an extension, even with the IRS’s announcement. This moves your filing deadline to October 15. In the case of an extension under these new rules, your tax return would be due on or before October 15, 2020, but your tax payment is now due on or before July 15, 2020.

What about the audit window? The IRS normally has three years to audit a tax return. The three-year window to audit a return typically starts on either the tax return due date or the filing date, whichever is later. If shortening the audit window is important to you, consider filing sooner versus later as it is not clear what these delays in filing will do to audit rights.

What will states do? States are rolling out their own guidelines for extensions. Many states are conforming to the IRS deadline, while others are acting independently. Maryland and Virginia both announced that they are following the IRS’s July 15th filing deadline.  The AICPA has created a chart to track what states are doing and is found at this link:  https://www.aicpa.org/content/dam/aicpa/advocacy/tax/downloadabledocuments/coronavirus-state-filing-relief.pdf

What if I get a penalty anyway? Affected taxpayers subject to penalties and additional tax despite this relief may seek a waiver of them.  Waivers are generally requested by calling the IRS at 1-800-829-1040 or filing a claim using a Form 843.

Attorney Beverly L. Winstead is the founder and managing member of the tax law firm Law Office of Beverly Winstead, LLC, specializing in tax resolution, estate planning and sports and entertainment law. In 2018, she was honored as one of the National Bar Association’s Top “40 Under 40” lawyers in the country.