As a result of the COVID-19 crisis, many federal and New York State tax deadlines were extended. In addition, those who had pending audits or tax collection matters or were paying off back taxes got a temporary break. However, many of these tax relief measures are set to end on July 15, 2020. What should you do? Here are a few key points you need to know:

tax deadline loomsFederal Taxes

  • Filing and Paying Taxes. Taxpayers were allowed to defer filing and paying their federal taxes until July 15th, without penalties and interest, regardless of the amount owed. This included taxes for individuals, trusts, estates, gifts, partnerships, corporations, and other non-corporate tax filers, and Americans who live and work abroad. In addition, First and Second Quarter Estimated Tax payments were postponed to July 15, 2020. For 2016 tax returns, the deadline to claim a refund was also extended to July 15, 2020. At the end of June, the IRS has announced that these deadlines will not be further extended. However, individual taxpayers unable to meet the July 15 due date can request an automatic extension of time to file until October 15. To get an extension, taxpayers must estimate their tax liability on the extension form and pay any amount due. For people facing hardships, including those affected by COVID-19, who cannot pay in full, the IRS has several payment options available to help which would allow taxpayers to avoid interest and penalties. See the IRS website for more information.
  • Audits and Collections. Audits that were pending as of the start of COVID-19 have continued, but generally, new audits were not started during this period. Many collection activities were suspended including liens and levies, passport certification, seizures of personal residences, and referral to private collection agencies. It is not clear when these will resume at pre-COVID levels. In the meantime, taxpayers who wish to settle their tax matter have several options including an Installment Agreement and Offer in Compromise. For those in collections, they can request a temporary delay of the collection process. If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer’s financial condition improves. Penalties and interest continue to accrue until the full amount is paid.
  • Installment Agreements. Taxpayers who suspended their installment agreement payments between April 1 and July 15, 2020, must resume their payments by their first monthly payment due date after July 15. Note that interest did continue to accrue while payments were suspended. Taxpayers who had their bank suspend direct debit payments should contact the bank immediately to ensure their first monthly payment due date occurring on or after July 15, 2020 is sent to avoid penalties.
  • Offer in Compromise (OIC). Those who have a pending OIC should resume their required payments starting July 15, 2020. The IRS will allow taxpayers to pay any skipped payments at the end of the offer period if the offer is accepted. If the taxpayer stops making payments under an existing OIC because of a COVID-19 hardship, the taxpayer should resume payments and make up the missed payments by July 15, 2020, or contact the IRS to discuss their situation.
  • Private Collection Actions. Taxpayers who had their Private Collection Action payments on hold should resume payments by July 15 or work with their assigned PCA to establish a new payment arrangement or restructure an existing one based on their current situation.

New York State Taxes

  • Income Tax Filing and Payment. As with the IRS, New York State extended its tax filing due date to July 15, 2020, for state personal income tax and corporation tax returns. This has not been extended. Note that New York State is only accepting electronic signatures on tax returns through July 15, 2020.
  • Sales Tax Filing and Payment. Taxpayers who were unable to meet quarterly sales tax filing and/or payment requirements in March due to COVID-19 were able to have their deadlines extended to June 22, 2020, and have penalties and interest abated during this time period. No additional provisions have been made at this time.
  • Audits and Collections. Taxpayers should request audit extensions and/or relief from collection actions if necessary.
    Additional information for taxpayers is available on the IRS and New York State Coronavirus web pages.

Additional information for taxpayers is available on the IRS and New York State Coronavirus web pages.

Taxpayers who have or anticipate problems paying their tax debts should speak to a qualified tax professional as soon as possible. The present delays will not continue for long and taxpayers have the most options for resolving their dispute when they respond early in the audit or collection process.

If you have a tax problem, contact us for a free 15-minute consultation.

Filed Under: Collection Due Process, IRS, New York State, NYS Sales Tax, Sales Tax