If ever there was an ‘all hands on deck’ situation requiring public and private institutions to work together, the COVID-19 pandemic is it. No, pandemics themselves are not unprecedented. How the world has responded to this particular pandemic is unlike anything most of us have ever witnessed. Whether you agree with what government has done, it is what it is.
The IRS is doing its part to fight the effects of the pandemic by offering across-the-board tax relief to those who have not yet filed their 2019 returns. Under normal circumstances, the deadline for filing and paying income taxes is April 15. That has been extended until July 15 for this year only.
Individual taxpayers, trusts, and corporations all qualify for the extension. Furthermore, it is not necessary to contact the IRS or fill out any additional forms. In short, nothing need be done until the July 15 deadline. The extension also applies to first quarter estimated tax payments that would otherwise be due on April 15.
Relief for Sole Proprietors
Tax filing relief will benefit businesses of all types and sizes from coast-to-coast. Perhaps the ones who benefit the most are sole proprietors with either no employees or a limited workforce made up of family members. They are the most vulnerable at tax time, even under ideal conditions.
April 15 is normally the deadline for sole proprietors to pay both their first estimated tax payment for the new year and whatever they still owe for the previous year, explains Dallas-based BenefitMall. Those who did not pay enough in estimated taxes face a double whammy of sorts. It is enough to cripple some smaller businesses well into the summer.
IRS relief will make it easier for them to set aside the money they need to pay their taxes. That doesn’t necessarily mean the July 15 date will be any easier, but at least no one will be forced to make tax payments at a time when revenue is scarce.
Penalties to Resume on July 16
BenefitMall points out that penalties for late filing and payments are set to resume on July 16. At that time, the same rules that normally apply will once again kick in. Thus, it is imperative for business owners to start setting money aside now. Ignoring tax obligations until the first week of July only serves to make an already bad situation untenable.
State Rules May Differ
Taxpayers and businesses should also be aware that IRS relief only applies to federal tax returns and payments. State rules may differ. It is reasonable to assume that some states will follow the IRS example as they normally do with tax issues. But there are likely other states that will not extend their filing deadline.
Anyone unsure of state rules should contact the appropriate taxing authorities for more information. But expect to have a difficult time getting through. Phone lines are always busy during tax season; this year will be no exception. The added stress of dealing with COVID-19 will probably encourage more people to reach out for answers. Worse yet, state taxing authorities may not have any clear-cut answers to offer.
There is no doubt that the COVID-19 pandemic has upended life as we know it. Getting through this will require a unified effort from all of us. As strange as it sounds, the IRS is doing its part by extending the April 15 tax deadline by three months. If you have not yet prepared your tax return, you now have until July 15 to file it. Hopefully that helps you breathe a little easier.