Due to the situation created by the coronavirus, Varnum’s tax team has been fielding questions from clients, co-workers and accountants about potential changes in the tax filing and tax payment deadlines, as well as other IRS administrative issues such as examinations, collection actions and payment plans.
Because the president declared a national emergency, the IRS has broad powers under statute to extend certain deadlines. The IRS also has broad administrative authority. As of the date and time of this email, there has been no official guidance issued on extending the April 15 deadline for the filing of income tax returns. However, statements made on March 17, 2020 by Secretary of Treasury Mnuchin suggest that the government will allow a 90-day deferral of tax payments to the IRS.
Under this program, individuals can defer up to $1 million of tax payments, and corporations can defer up to $10 million, with no penalties and interest for 90 days. This program does appear to require the filing of a tax return first in order to obtain the deferral. Many questions on this program remain, and Varnum’s tax team will provide updates as they evolve.
Out of an abundance of caution, individuals may want to file an extension (Form 4868) prior to the filing deadline. This is NOT an extension in time to pay. As such, the first quarter tax estimates are due April 15 as is any shortfall in the expected 2019 tax liability. Please note, with respect to the payment deferral program, the secretary has not clarified whether the extension form or the estimated tax payment voucher falls under the definition of “return” for the payment deferral program. Finally, there are some safe harbors for estimated tax payments that may apply. Check the IRS website or talk to a tax advisor.
Tax preparers should check with the IRS employee assigned to any matter for the case status, including document requests, etc. If your client is honoring an IRS levy on an employee at this time, those obligations are still in force unless notified otherwise by the IRS. Some deadlines such as filing a Tax Court Petition for relief are statutory in nature and still valid.
This is an unprecedented situation, and we will provide further updates as they evolve.