Small Business Tax Resources Related to COVID-19

Friday March 20, 2020 Updates

According to Treasury Secretary Steven Mnuchin, the tax filing due date has been moved from April 15th to July 15th. This is a change from the original plan which extended just the payment deadline and required taxpayers to file their returns or an extension of time to file by April 15th.

Thursday March 19, 2020 Updates

On March 18, 2020 the IRS released Notice 2020-17 which provides authoritative confirmation that the filing due date for Individual and Corporate tax returns has not changed however the IRS has postponed the payment due date to July 15th. Essentially, individual taxpayers can postpone up to $1,000,000 in payments while corporations (including consolidated groups) can defer up to $10,000,000 in payments. This also includes payments of tax on self employment income and any first quarter estimated tax payments.

According to Notice 2020-17 The Secretary has determined that this applies to any “person” with a Federal income tax payment due April 15, 2020. Section 7701 of the internal revenue code defines “Person” as any individual, trust, estate, partnership, association, company, or corporation.

Furthermore, any payments received after April 15th will, at this time, accrue interest and penalty as of July 16th but not prior to. In the event affected taxpayers do incur penalty despite this relief, taxpayers may seek relief under section 6651 for a failure to pay tax or seek a waiver to a penalty until section 6654 for a failure by an individual or certain trust and estates to pay estimated income tax. 

To be clear, this relief is not available to corporate taxpayers or tax exempt organizations who fail to make estimated tax payments under section 6655 of the IRC after July 15th. 

It would appear that the deferral of the first estimated tax payment would also include a deferral of the second estimated tax payment however nothing in Notice 2020-17 specifically states this observation.

Wednesday March 18th, 2020 Updates

Treasury Secretary Steven Mnuchin announced that the agency is giving taxpayers an additional 90 days to pay tax bills up to $1 million for individuals and $10 million for businesses. Federal tax filings however, are still due on April 15th for both Individuals and C Corporations. Taxpayers are allowed to file for a 6-month automatic extension which would delay the Federal tax filing until October 15, 2020. At this point, it is still unclear as to whether or not the U.S. Taxpayers will be allowed an automatic extension of time to file as well. At SmartBooks, we would like to note that there are a lot of conflicting articles being published in regards to this matter. Until the US Treasury releases an official statement, we do caution you to take what you read with a grain of salt. As of right now, the only thing we can do is analyze how information is presented to try and come up with a conclusion on what will be the final outcome. 

Questions still to be answered:

1. Does the extension of time to pay include an extension of time to file? 
2. How does this impact the first and second quarter estimates typically due on April 15th and June 15th?
3. Does this apply to sales tax returns?
4. Does this apply to payroll tax returns? 
5. Does this apply to estate and gift tax returns? 
6. How will states respond to changes made at the Federal level? 

It’s also important to note that if you are expecting a refund this year, it is still beneficial for taxpayers to file as soon as possible. 

During these uncertain times, cash inflow and outflow are important factors to staying afloat. One possible way of finding some unclaimed cash is to review your prior year tax returns for any potential deductions that were missed or to identify any tax planning opportunities that we can retroactively claim. For example, businesses who may have been eligible for the research and development tax credit but didn’t claim it can amend up to three prior years to claim the credit or they can simply adjust their carry-forward to claim in future years. There are also options to take immediate relief against your payroll taxes.

Need some Tax Guidance?

At SmartBooks, we offer a free second look at your prior year tax returns. We invite you to use this link to schedule a meeting with our team of professionals who are here to help you. 

Additional COVID-19 Small Business Resources

As new information is released we will continue to update you on the changes and continue to provide you insight and planning opportunities that benefit both you personally and your business. For more information and other helpful resources check out the COVID-19 Resources for Small Business.