27 May Will There Be Tax Changes Due to the Coronavirus Pandemic?
Governments around the world have been impacted by the coronavirus pandemic and are implementing emergency measures to support their economies. The U.S. federal, state, and local governments have released new legislation and tax code updates to ease the economic burden felt by citizens and businesses.
On March 25th, 2020, the IRS unveiled the new People First Initiative, which would be effective between April 1, 2020 and July 15, 2020. In a statement, IRS Commissioner Chuck Rettig assures U.S. citizens, “IRS employees care about our people and our country, and they have a strong desire to help improve this situation.”
“The People First Initiative is designed to help people take care of themselves and is a key part of our ongoing response to the coronavirus effort.”
Deadline Extensions and Tax Code Updates
One of the key points of the initiative is the extension of federal tax filing and payment deadlines from April 1st, 2020 to July 15th, 2020. The extensions apply to all taxpayers. As the extensions are automatic and apply to all, there is no need to file other extension forms or contact the IRS to qualify. This also means that taxpayers have until July 15th, 2020 to verify they qualify for the Earned Income Tax Credit.
And on March 27th, the Treasury Department and the IRS issued Notice 2020- 20. The new notice amplifies Notice 2020-18, outlining additional relief and the postponement of certain Federal gift tax return filings and payments.
More deadline extensions were announced on April 9th, 2020, when the IRS announced that Individual taxpayers that cannot meet the July 15th, 2020 deadline and require more time can request an extension of up to October 15th, 2020. The extension can be requested by filing Form 4868. Businesses may also request an extension beyond the new July 15th, 2020 deadline by filing Form 7004.
Some other highlights of the IRS People First Initiative include:
Resolve Outstanding Liabilities – During this time, the IRS encourages people to contact their tax professionals and take this opportunity to resolve any outstanding liabilities. Now would be the best time to file their delinquent returns and gain a “fresh start” by entering an Installment Agreement or Offer in Compromise.
Existing Installment Agreements Payments – Payments due between April 1st and July 15th, 2020 under an existing Installment Agreement are suspended. Taxpayers may also suspend direct debit payments during this period. Should the taxpayer choose not to pay during the specified period, there will be no default. However, interest will continue accruing on unpaid balances, if any.
Delinquent Return Filings - The IRS won’t default an Offer in Compromise (OIC) for taxpayers who are delinquent in filing their tax return for the 2018 tax year. Taxpayers can file any delinquent 2018 return on or before July 15th, 2020.
Alabama has not yet passed a budget for fiscal year 2021. However, the state will follow federal lead by delaying income tax filing deadlines from April 15 to July 15. The Department of Revenue will also move back the February, March, and April sales tax payment deadlines for small businesses impacted by COVID-19.
Has the coronavirus impacted you or your business? Are you having a challenging time making sense of all the tax updates, deadlines, and exemptions? Contact Golden Tax Relief.