Treasury Secretary Steven Mnuchin stated at a press conference on March 17, 2020 that the payment deadline would be extended 90 days from April 15, 2020. His comments did not alter the Form 1040 filing deadline of April 15, 2020. Individuals can defer up to $1M, and corporations are able to defer up to $10M in tax payments for 90 days completely interest and penalty free. There was mass confusion as many media outlets were incorrectly reporting that the filing date had been extended to July 15th. At this point, there has been no change to the April 15th filing date.
What does this mean for you? Well, refund returns will not see any change. They represent 72% of 1040s. Mnuchin noted that refund payments will not be interrupted. But if your client owes, file the return by April 15th and take advantage of the payment grace period of 90 days. At this point, there is no guidance on extended returns, but perhaps a return filed after 4/15 will not be given the interest and penalty free grace period. This is not clear, and it could change. With the reality of the world we live in, though, many returns will be put on extension. However, if you know a client usually owes on their 1040, it would be worthwhile to file by April 15th and allow the client the extra 90 days to pay. Extending that client may kill the 90-day payment grace period. This is uncertain as it was not addressed in the press conference. Again, no written guidance has issued at the time of this writing, and the issue is largely unclear. However, attention should be given to avoid the failure to pay penalties.
I think this is a decent compromise. Many of you were clearly against extending the filing deadline because it would extend your already very difficult filing season. This allows money to stay in the hands of taxpayers for a full quarter with as much as $300B being deferred. A 7/15 filing date would have required additional guidance on the 2020 estimated payments since the 4/15 and 6/15 payments often rely on a safe harbor which in that instance would not be established until 7/15. In addition, the 7/15 date would have been particularly difficult for any state which uses federal AGI as a starting point for its return. Those cash-strapped states may have been forced to extend receipt of payment to 7/15 at a time when relief efforts are severely draining funds and unemployment claims are spiking.
On the other hand, the effects of social distancing and the newly remote workforce are not lost on me. I fully understand other practitioners are squarely in favor of extending the filing deadline to 7/15. People who rely on volunteer preparers come to mind. So do the elderly. These people do need help since it will be difficult to get tax info to preparers who may not be in their offices. Scanning documents for email will soon be a newly found skill for many Luddites. In addition, if you already filed, your payment may be scheduled to be debited on 4/15. That could be very difficult to take back and extend 90 days. Screws fall out all the time. The world is an imperfect place. But remember that this is a compromise forged amidst many competing interests. Since we are in these increasingly uncertain times, it would be wise for us all to take a breath and recognize we are in the same shared tax environment. It may be the new normal. I feel compassion for IRS employees who will be inundated with questions and concerns from a confused taxpayer base through at least 7/15. But remember that this too shall pass. And on a selfish note, thank you to everyone who recognized Johnny Bender’s quote from The Breakfast Club as meant to lighten spirits in a small way. Feel reassured that we will endeavor to continue to always keep you informed on the latest news. Stay tuned.
Nick Spoltore is VP of Tax & Advisory Content for Surgent CPE. Mr. Spoltore is a graduate of the University of Notre Dame and of Delaware Law School. Before joining Surgent, he practiced tax and business law at the firm of Heaney, Kilcoyne in Pennsylvania and also in Delaware.