On March 17, 2020, U.S. Secretary of the Treasury Steven Mnuchin announced that the Department of the Treasury will be deferring the April 15th deadline to pay taxes owed. Individuals and many businesses will have an additional 90 days to make their payments to the IRS.
Individual taxpayers will be able to defer up to $1 million of tax liability. Corporations will receive an extension on up to $10 million of tax liability.
For individuals whose tax home is in the United States, both the tax filing and tax payment due date is normally April 15th. For those United States persons whose tax home, in a real and economic sense is outside of the United States, under the Regulations their normal filing due date is June 15th.
Taxpayers have always been able to obtain additional time to file their U.S. individual income tax return by timely filing Form 4868, “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return”. The timely filing of this form extends the due date until October 15th, 2020.
Payments, however, are due by the original filing date. If taxpayers have not paid at least 90% of their ultimate tax liability by the original due date they would be subject to a late payment penalty equal to ½ percent per month (until paid) up to a maximum of 25% plus interest. The announced extension will eliminate any potential late payment penalties and interest for an additional 90 days.
At this point in time, Treasury has not announced any changes in the filing deadline. Also it is not clear, whether it is necessary to timely file an extension in order to receive a deferral of any payments. Hopefully, Treasury will provide additional guidance shortly.
This payment extension is part of the Administration’s effort to curb the economic effects of the coronavirus pandemic. Treasury estimates the extension will add up to US $300 billion of liquidity in the economy as individuals and businesses have more time to pay their taxes.
“This is a commonsense step to afford individual Americans and businesses access to financial resources they need during this time of economic and social disruption,” Senate Finance Committee Chairman Chuck Grassley said in a statement.
The IRS routinely extends the filing deadline for victims of natural disasters. On March 6th, 2020 the IRS granted victims of recent tornadoes in Tennessee until July 15 to file various individual and business tax returns and to make tax payments.
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