The extension gives individuals and many businesses 90 extra days
to send checks to the government
March 17, 2020 By
Bloomberg News
Treasury
Secretary Steven Mnuchin announced his department is pushing back the April 15
deadline to pay taxes owed, giving individuals and many businesses 90 extra
days to send checks to the government.
Individuals
can defer up to $1 million of tax liability and corporations get an
extension on up to $10 million, Mr. Mnuchin said at a news conference
Tuesday.
“All
you have to do is file your taxes,” he said. “You’ll automatically not get
charged interest and penalties.”
The
payment extension, which affects millions of taxpayers, is part of the Trump
administration’s effort to curb the economic
effects of the coronavirus. Mr. Mnuchin said the delay will
free $300 billion of liquidity in the economy as individuals and businesses
have more time to pay their taxes.
Delaying
payment requirements will give businesses and individuals nearly three more
months to meet their IRS obligations, potentially lessening cash-flow issues
that some businesses are facing as many people stay home and spend less money
on dining out, entertainment and transportation.
“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
administration is also considering delaying the estimated quarterly tax
payments that self-employed workers and businesses pay the IRS throughout the
year, according to
two people familiar with the matter. The first payment is typically due April
15.
Wealthier
individuals — ranging from the upper-middle class to the top 1% — could benefit
the most from this move because they are more likely to owe the government
money and be able to wait until the filing deadline to submit their returns,
said John Koskinen, a former IRS commissioner.
Lower-income
workers, especially those who qualify for refundable tax breaks such as the
child tax credit and the earned income tax credit, tend to file early because
they get a refund check.
“The
number of blue-collar workers, working class people, I imagine, who are filing
in the first two weeks of April is probably a very small percentage,” Koskinen
said.
Many
higher-income people, especially those who own a business or invest in multiple
partnerships, apply for an automatic six-month extension to file because their
returns are more complicated. In a typical year, they’d have to submit 90% of
their tax liability on April 15 or face interest and penalties on the late
payment.
The IRS
routinely extends the filing deadline for victims of natural disasters. For
example, the agency granted victims of recent tornadoes in Tennessee until July
15 to file. In 2018, the IRS delayed the due date by a day when the computer
system crashed on the deadline and taxpayers were unable to submit their
returns.
Nearly
68 million individuals had already filed their tax returns as of March 6,
according to the most recent statistics from the IRS. That’s about 45% of the
returns the agency expects to receive this year.
“For a
lot of people it makes sense to stick to the original schedule,” said Meredith
Tucker, a principal at accounting firm Kaufman Rossin. “Don’t just kick the can
down the road if there is no benefit.”
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