Since the time of this post, the IRS has removed the $1 million and $10 million limitations referenced below. See our March 21, 2020, posting for this update.
As with all things related to the COVID-19 pandemic, information is coming out very quickly and changing by the hour. SDK’s tax team is paying close attention to not only the IRS and state communications, but multiple news sources as well.
Here are the tax related highlights from the March 17, 2020, White House press conference as clarified in an IRS announcement published March 18, 2020:
• Tax returns are still due April 15.
• Individuals, trusts and estates can postpone paying up to $1 million of income taxes due April 15, 2020, for up to 90 days without incurring interest or penalties if paid within 90 days of the due date.
• Each consolidated group of C corporations and individual C corporation not in a consolidated group can postpone paying up to $10 million of income taxes due April 15, 2020, for up to 90 days without incurring interest or penalties if paid within 90 days of the due date.
• Amounts owed up to $1 million and $10 million respectively that are deferred using this relief provision and are not paid by July 15, 2020, will accrue interest and penalties beginning July 16, 2020.
• Amounts owed over $1 million and $10 million respectively that are not paid by April 15, 2020, are subject to interest and penalties beginning April 16, 2020.
The $1 million threshold applies on a per tax return basis regardless of an individual’s filing status.
Income taxes for this relief provision includes both taxes due with 2019 income tax returns and first quarter 2020 estimated income taxes due April 15.
The June 15, 2020, due date for second quarter 2020 estimated income taxes, when applicable, has not changed. In other words, second quarter 2020 estimated income tax payments are due one month prior to first quarter’s due date.
This provision does not provide relief to other kinds of taxes, such as gift taxes, estate taxes or payroll taxes. However, for this purpose income tax includes self-employment taxes on an individual income tax return.
Taxpayers may seek a waiver on interest and penalties for lack of payment due to reasonable cause that will be considered on a case by case basis.
We expect Minnesota and most states to provide similar relief. Some states already have. We will provide an update when there are additional developments.