If March Madness can be canceled, no one should be shocked that the coronavirus crisis now is pushing back when you owe your tax bill.
If you’re getting a tax refund, your best bet is to file the return as soon as you can and aim for that April 15 deadline.
But if you owe money, take an extra look at what’s planned now to give relief to taxpayers during the coronavirus crisis.
A three-month break for paying tax bills is part of the federal government’s plan to get the economy back on its feet.
U.S. Treasury Secretary Steven Mnuchin discussed the extension Tuesday at a press conference.
The Internal Revenue Service offered no official comments to Mnuchin’s remarks by 2 p.m. EDT Tuesday.
The temporary 90-day deal would help small business owners and others.
The federal government will give filers up to 90 days to pay income taxes due on up to $1 million in federal income tax owed, Mnuchin said in the press conference.
Those who pay later would not be slapped with interest or penalties, as they would be based on the existing rules before COVID-19 struck havoc in financial markets and the economy.
On Friday, President Donald Trump declared a national emergency that paved the way to offer more immediate virus-related relief, including a tax break relating to the April 15 deadline. The plan is to allow certain individuals and businesses negatively affected by the coronavirus crisis the opportunity to “defer tax payments without interest or penalties.”
Some small-business owners welcomed the added relief, as it’s one way to stretch out money when cash flow is being squeezed.
But certified public accountants and other tax professionals note that many tax returns are on track to be filed on time. Many tax professionals want more details of any new rules, as we’re less than a month away from April 15.
“I can take or leave extending the April 15th deadline. We’re already in high gear here preparing tax returns. Most of my clients are on top of things,” said George Smith, a CPA with Andrews Hooper Pavlik in Southfield, Mich.
Even so, Smith received five emails from clients about the extension within an hour of the White House’s televised news briefing on Tuesday
Many people could benefit from more time to pay —without interest and penalties —given the job cuts, the large losses to investments after the Dow Jones Industrial average dropped about 30% in the past month and other disruptions in the economy due to the coronavirus crisis.
“I think deferring paying taxes up to 90 days for individuals is a great idea right now,” Smith said.
“I have a lot of clients with big tax bills due to large capital gains and now 30% of that money is gone,” Smith said.
“Reminds me of dot.com crisis when clients sold off stocks for big gains and had no money the next year,” he said.
Investors may owe taxes on mutual funds held outside of a 401(k) plan based on distributions —even if they haven’t actually sold any shares or received any cash from the investments.
Buzz of the tax change began building last week, as tax professionals and others heard that Mnuchin stated that a delay of the April 15 deadline was being considered.
The American Institute of CPAs wanted the Treasury Department and the IRS to provide relief to all taxpayers in light of the “uncertainty and challenges caused by the spread of the coronavirus pandemic.”
So far this year through March 6, the IRS reports that nearly 68 million individual income tax returns have been filed. That’s up 0.4% from the same time last year.
More than 33.3 million returns were prepared by the taxpayers themselves, not tax professionals. That’s up 3.1% from a year ago.
The latest data from the IRS indicated that 52.7 million refunds were issued, down 1.4% from the same time a year ago. The average refund so far was $3,012 vs. $3,008 a year ago.