Deferring 2020 Tax Payments Due to the COVID-19 Outbreak
For both private and commercial taxpayers, there is some relief from the Covid-19 outbreak and the damage it has wrought on the financial side. Known as the Notice 2020-17 as part of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, it affords more time to make payments than was previously the case (up to certain limits).
How Much Time Has Been Added On?
As covered in a March briefing to the press by the President, the act intended to assist taxpayers and allows for a bit more time to get federal tax payments sent in.
Instead of the usual April 15th deadline that most people are familiar with, it’s possible to file tax payments up until July 15th, a full 90 days later. This has been done to assist people who have been impacted financially by the ramifications of the ongoing Covid pandemic. It forms one of a collection of measures implemented to assist everyday Americans and business owners too.
Are There Limitations to Tax Referrals?
Yes, there are.While both the U.S. Treasury Department and the Internal Revenue Service have mutually agreed to postpone the tax payment deadline by 90 days, there are inevitably some caveats to it.These caveats apply to both private citizens (non-corporates) and corporate taxpayers alike, though they’re likely to only affect high-net-worth individuals, current high earners, and SME corporations, rather than family run stores.
Therefore, it’s important to pay attention to the details if you believe they may apply to you. When in doubt, it’s always a good idea to seek out the services of CPAs in South Florida who can provide updated guidance. This covers you in case there are later revisions or updates worth noting or areas that people have been observed asfrequently misunderstanding.
What Are the Limitations?
Along with the deferred deadline for taxpayers to July 15th from the usual April 15th date, there are other limitations to be aware of.
For corporations, they are now permitted to postpone the payment of federal income tax to a limit of $10 million. Furthermore, consolidated groups are treated much the same and are as one with an identical $10 million maximum limit (not a separate limitation applicable per company within the group).
With non-corporate taxpayers including individuals, the limit is set differently.
For federal income payments for tax, the most that can be postponed is $1 million. For most people, this will not be exceeded unless they are a 7-figure earner or beyond.
Administrative relief applies to self-employment too. It is also the same amount whether the individual is single or filing jointly when married (same per individual regardless of marital status and when filing jointly).
So, Should You Defer Federal Tax Payments?
There is no right or wrong answer to this one.Certainly, if you’re someone who would prefer to get them paid and out of your mind, then doing so earlier may be better for you. The checking account interest earned by sitting on the funds is likely to be minimal for many people, but not all. However, if you need more time to put together the money to cover the federal taxes, then the extra 90 days is a gift.