Many individuals and businesses are facing significant financial problems arising from the coronavirus. The Federal and New York State governments have responded with several changes to provide tax relief.
Here are the key provisions taxpayers need to know:
1. Filing and Paying Taxes. Taxpayers may defer filing and paying their federal taxes until July 15th, without penalties and interest, regardless of the amount owed. This applies to anyone with a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020, including 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 are postponed to July 15, 2020. For 2016 tax returns, the normal April 15 deadline to claim a refund has also been extended to July 15, 2020.
2. Audits and Collections. The IRS People First Initiative temporarily suspends many IRS actions. Generally, new audits will not be started during this period, but ongoing audits will continue remotely to the extent possible as will appeals. Many collection activities have been suspended including liens and levies, passport certification, seizures of personal residences, and referral to private collection agencies. Field revenue officers will continue to pursue high-income non-filers and perform other similar activities where warranted. In addition, where expiration of the statute of limitations might jeopardize IRS interests, it will issue Notices of Deficiency unless taxpayers consent to statute extension. For more information on these changes, visit the IRS website.
3. Installment Agreements. For taxpayers under an existing Installment Agreement, payments due between April 1 and July 15, 2020, are suspended and taxpayers will not be found in default. However, interest will continue to accrue during this period. Taxpayers can continue to apply for new installment agreements. Note that payments under Direct Debit Installment Agreements will not automatically be suspended. The IRS recommends taxpayers contact their financial institution to stop automatic payments. If automatic payments are suspended, taxpayers must contact their bank to resume payments by July 15, 2020.
4. Offers in Compromise (OIC). Taxpayers with pending OICs will have until July 15, 2020, to provide requested information, and no pending OICs will be closed through July 15, 2020. For accepted OICs, taxpayers may suspend payments through July 15, 2020. The IRS will not default OICs for failure to file 2018 returns but taxpayers must file by July 15, 2020.
5. CARES Act Business Tax Relief. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) allows deferral of an employer’s portion of social security taxes for all of 2020. This must be repaid in two installments: the first due December 31, 2021, the second due December 31, 2022. Businesses may also be eligible for an employee retention tax credit equal to 50 percent of qualifying wages paid to each employee in a particular quarter, up to $10,000 per employee. However, these tax credits are not allowed where the employer takes advantage of the Paycheck Protection loan program.
6. Tax Credit for Employers for Paid Sick Leave Wages. The Family First Coronavirus Response Act gives employers a refundable tax credit for 100 percent of the qualified sick leave wages paid to their employees under the sick leave and family medical leave programs that are part of the law.
7. Payroll and Medicare Taxes. Employers must continue to file and pay payroll and Medicare taxes.
NEW YORK STATE TAXES
8. Income Tax Filing and Payment. New York State has extended the April 15, 2020 tax filing due date to July 15, 2020, for state personal income tax and corporation tax returns. In addition, taxpayers are permitted to defer all related tax payments due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed. Note that New York State is now accepting electronic signatures on tax returns through May 9, 2020.
9. Sales Tax Filing and Payment. Sales tax payments and returns were due March 20, 2020. However, taxpayers who were unable to meet quarterly sales tax filing and/or payment requirements due to COVID-19 may have their deadlines extended by 60 days and have penalties and interest abated during this time period. To request relief from penalties and interest, see Tax relief for quarterly and annual sales tax vendors affected by COVID-19. For additional guidance, see also N-20-1, and N-20-6. Note that if relief is granted, tax returns must be filed and paid within 60 days of the March 20th deadline or relief will be rescinded. Relief does not apply to part-quarterly (monthly) filers nor PromptTax filers.
10. Audits and Collections. New York has indicated that it will delay state debt collection for 30 days, which presumably includes tax debt collections. Audits are being conducted remotely to the extent possible. Collection agents are no longer performing field visits. 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.
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.
The information provided is solely for educational purposes. It is not intended to provide and does not constitute legal advice. Laws are subject to constant change. Every client should consult a qualified professional to discuss its, his or her rights, obligations, and unique circumstances.
Tenenbaum Law, P.C.
Representing Taxpayers in IRS & NYS Tax Matters
534 Broadhollow Road, Suite 301, Melville, NY 11747 Phone: 631-465-5000| Fax: 631-465-5003 | litaxattorney.com