This is the 2nd is a series of updates on resources to help manage your business or nonprofit organization in the shadow of the COVID-19 global pandemic. This update focuses on changed Tax Filing Deadlines as of Sunday morning, March 22.
For easy reference, previous updates:
Government powers in a Peacetime Emergency and what they mean for your business, and
COVID-19 Workplace and Employment issues guide, by my colleague Bill Egan.
FIRST, A REMINDER:
Tax filing requirements are set out in state and federal statutes, requiring an act of Congress or the State Legislature. As discussed in the brief on emergency powers of the President or a Governor, emergency actions by an executive must be within the specific scope of the emergency powers designated by another act of Congress or a Legislature. In other words, a Governor cannot magically move a deadline for filing taxes or paying taxes; they must have the clear authority to make this change.
The IRS must issue a Notice or similar official statement to move a federal deadline. At the state level, the Governor must issue an Executive Order, or the State Department of Revenue or similar state tax authority must issue an official statement under the Governor’s emergency declaration(s). Similarly, local tax deadlines can be adjusted only consistent with emergency declarations, and only through official statements and orders of the Mayor or a County Executive or similar county official.
Remember as well that Twitter posts or oral statements at a press conference do not have the force of law, except possibly for statements of the President; official agency or executive statements and notices are required to make these emergency changes effective. For instance, on the morning of Saturday March 21, U.S. Treasury Secretary issued this tweet:
At @realDonaldTrump’s direction, we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.
For most of the day, state governments and lawyers observed that the IRS did not post any official notice of this change to the federal “filing” deadline. Governors expressed confusion about whether this statement would actually take the force of law; only in the late afternoon did the IRS post IR-2020-58.
I share this just to proceed with caution about rumors or public statements without formal statements. This includes drafts of legislation in Congress or at the State level.
Please call or email me with any questions as things change rapidly. If I cannot answer your question, it is very likely one of my colleagues can do so.
FEDERAL TAX DEADLINE CHANGES:
As mentioned, IRS announcement IR-2020-58, and subsequent IRS Notice 2020-18 allows all federal taxpayers to defer federal tax filing and federal tax payments that would be due on April 15, 2020. The filing and payment deadline for these taxes is now July 15, 2020.
Taxpayers covered by the filing and payment deferral include:
Trusts and estates
Those who pay self-employment tax.
This particular extension applies only to those taxes originally due on April 15, 2020.
No action is needed to take advantage of this 3-month extension for all taxpayers. No interest or penalties will apply for the period until July 15, 2020.
Individuals who see more time to file – beyond July 15, 2020 – can submit a filing extension by filing Form 4868 through a tax professional, using tax software or using the Free File link on IRS.gov. Businesses seeking an extension beyond July 15, 2020 need to file Form 7004.
The IRS urges anyone due a refund to file as soon as possible, as the IRS is still processing refunds, claiming that most refunds are still being issued within 21 days.
Please note this key statement:
“No extension is provided in this notice for the payment or deposit of any other type of Federal tax, or for the filing of any Federal information return.”
ONLY those federal taxes originally due to be filed and paid on April 15 are subject to this extension. Please call or email if you have questions about other federal tax filing deadlines.
STATE TAX FILING CHANGES:
Several states have already postponed tax filing deadlines, and in some cases also deferred payment requirements.
The Association of International CPAs has a useful summary of State Tax Filing Guidance for Coronavirus Pandemic. Note that this linked document is current as of midday March 20. I will try to update as I am able.
MINNESOTA TAX DEADLINE CHANGES
Avisen’s home state of Minnesota has adopted the following changes to date, per this handy MN Department of Revenue COVID-19 page:
A 30-day Sales and Use Tax grace period for businesses that have had to suspend or reduce services, such as restaurants and bars, under Gov. Walz’ Executive Orders 20-04 and then 20-08.
Unfortunately, businesses do need to still file their returns, but payment and interest will be deferred until April 20.
A 30-day Lawful Gambling Tax grace period for organizations that request an extension by March 27.
A 60-day filing extension for Minnesota Care Taxes for returns that were due on March 16, 2020.
Organizations have to request an extension by April 15
These organizations will then have returns due by May 15
These taxes include the Provider Tax; Hospital Tax; Surgical Center Tax; Wholesale Drug Distributor Tax and Legend Drug Use Tax.
As of this posting on Sunday, March 22, Minnesota has not yet formally extended the April 15 filing and payment deadline. At his Saturday, March 21 news conference, Gov. Walz announced his intention to make the extension effective, but he and the Commissioner of Revenue have not yet determined whether they will need an Act of the Legislature to do so.
Again, it’s helpful to remember the limits of emergency powers, and a smart executive taking care to ensure the validity of each action under these powers.
LOCAL TAX DEADLINES:
So far, Property Tax deadlines have not been changed in Minnesota, and Sales and Use Tax filings are made to the state Department of Revenue rather than to local governments, even for locally-applied taxes.
In other states, local jurisdictions may need to take or have taken action to defer payment and filing deadlines. Please let me know if I can help you navigate this chaos.
In the next few updates, I plan to focus on Small Business Support, as well as a review of any Congressional action taken. As I write this, Members of Congress are deep in final negotiation on a large package including more emergency assistance for small businesses as well as states and local governments.
I am working with an outside colleague on some longer-term forecast of the scope and scale of this pandemic and what it may mean for business planning.
In the meantime, call or email me - or anyone else at Avisen – for everything from a quick check-in to a deep dive on a specific problem.
Stay safe and healthy, and #StayHome.