The 2020 IRS Federal Tax Delay Explained

| Staff

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2020 Tax Delay: Federal Tax Deadline Extended to July 15th

With the COVID-19 outbreak affecting individuals, groups, and institutions around the world, the United States federal government has granted a 90-day filing extension for the 2019 tax year. This applies to all taxpayers, regardless of how much they owe. Taxpayers now have until July 15, 2020, to submit income tax documents without risk of penalty or interest.

The extension applies to individuals, trusts and estates, corporations, and non-corporate taxpayers. Self-employment taxpayers also receive an additional 90 days. Taxpayers can extend their filing even further by submitting Form 4868 (for individuals) or Form 7004 (for businesses).

According to IRS Commissioner Chuck Rettig, "Even with the filing deadline extended, we urge taxpayers who are owed refunds to file as soon as possible and file electronically."

Rettig continued, "Filing electronically with direct deposit is the quickest way to get refunds. Although we are curtailing some operations during this period, the IRS is continuing with mission-critical operations to support the nation, and that includes accepting tax returns and sending refunds. As a federal agency vital to the overall operations of our country, we ask for your personal support, your understanding -- and your patience. I'm incredibly proud of our employees as we navigate through numerous different challenges in this very rapidly changing environment."

State vs. Federal Tax Deadlines

Before the federal government implemented tax delays, states like Oklahoma and Virginia had already postponed income tax payment deadlines, while other states delayed both tax filing and payment. States such as California, Alabama, Oregon, and South Carolina were among the first to announce income tax filing and payment postponements, with Iowa, New York, Wisconsin, and others later making the same change following the federal government's decision to delay.

State delays may not apply to businesses, however: In Oregon, businesses must still pay their estimated taxes. As states around the country continue to change, delay, and reestablish deadlines, taxpayers need to research and find out what the expectations are in their state.

Other Tax-Related Deadlines

Along with delayed payments and filings, the federal government extended deadlines for making contributions to individual retirement accounts, including Roth IRAs. The IRS has postponed penalty payments on retirements from last year, and individuals paying installments from previous tax years may defer temporarily.

Payroll taxes, excise taxes, and estate and gift taxes do not qualify for the extension. The IRS indicated that new audits will not commence, nor will face-to-face meetings with taxpayers under audit or in offers-in-compromise negotiations until at least July 15th as part of the new IRS People First Initiative.

The White House and United States Congress recently reached an agreement on a stimulus package to aid taxpayers. Currently, individuals with incomes up to $75,000 will receive direct payments of $1,200, with an additional $500 credit for each child per household. The amount phases out, ultimately offering no assistance for individuals who earn more than $99,000 annually.

Small and distressed businesses can access loans drawn from a $425 billion fund overseen by the Federal Reserve. This accompanies industry-specific loans targeting hospitality and tourism entities.

States have implemented additional tax guidelines and relief measures. Interest relief, changes to franchise or partnership tax, and waived late fees all seek to alleviate tax pressures amidst the COVID-19 crisis. The American Institute of CPAs offers comprehensive resources for taxpayers to access information about state and federal responses to COVID-19.

What Does an Extended Deadline Really Mean?

United States Treasury Secretary Steve Mnuchin credited President Donald Trump for implementing the tax deadline extension. Trump instituted the delay to ensure that taxpayers had adequate resources to prepare their taxes.

Economists and tax officials insist that filing early is still the best path forward. The IRS continues to issue refunds within three weeks of filing. Mnuchin echoed these sentiments: "I encourage all taxpayers who may have tax refunds to file now to get your money." Filing and quickly receiving refunds allows for Americans to channel their revenue back into the economy.

It remains unclear exactly how much the delay will influence the economy. Lower- to middle-income households often file earlier to get their refunds, while individuals with higher incomes file later because they often owe the government. The delay may allow refunds for the former, with payments by the latter infusing liquidity into the economy later this year.

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