Tax Payment Deferrals and Grace Period Announced

March 19, 2020 — On March 17, 2020, the Treasury Secretary announced that the government was going to allow taxpayers to defer the payment of taxes due on April 15, 2020 by 90 days with a $1 million cap for individuals and a $10 million cap on such deferred payments by corporations.  The Secretary did not address whether there would be an automatic extension also granted for filing income tax returns due on that day, even though the tax potentially would not be required to be paid on that date.  We now know additional details on how this program works.

Relief is strictly limited and does not provide an automatic extension of time to file the return.  Individuals can defer up to $1 million in payments for 90 days from the April 15, 2020 deadline. Corporations can defer up to $10 million in payments for 90 days after the deadline. During that time, the IRS has stated they will not charge interest or penalties.

The relief provided is available solely with respect to Federal income tax payments (including tax payments on self-employment income) due on April 15, 2020 for the 2019 taxable year AND Federal estimated income tax payments (including tax payments on self-employment) due on April 15, 2020 for the Taxpayer’s 2020 taxable year. You must still pay your next estimated tax payment due on June 15, 2020.  Simply put, the second quarterly payment will be due before the first one.

If the total amount of your tax payment and your April 15, 2020 quarterly estimated payment exceed this maximum ($1 million for individuals; $10 million for corporations), the excess needs to be paid by April 15, 2020.  As of now there is not a filing extension, only a payment extension.  The filing deadline remains April 15, 2020.

The Minnesota Department of Revenue recently announced that is granting a 30 day Sales and Use Tax grace period for businesses identified in Executive Order 20-04. During this time the department will not assess penalties or interest.  Identified businesses with a monthly Sales and Use Tax payment due March 20, 2020, will have until April 20, 2020 to make that payment. These businesses should still file their return by March 20, 2020. Currently, this grace period for penalty and interest is only for monthly filers and only for the March 20, 2020 payment. Identified businesses can request additional relief from penalty and interest for reasonable cause after April 20, 2020.

To be as clear as possible, here are the key pieces of information to take away from this communication:

  • The filing deadline remains April 15, 2020.
  • The relief provided is available solely with respect to Federal income tax payments (including tax payments on self-employment income) due on April 15, 2020 for the 2019 taxable year AND Federal estimated income tax payments (including tax payments on self-employment) due on April 15, 2020 for the Taxpayer’s 2020 taxable year. You must still pay your next estimated tax payment due on June 15, 2020.  Simply put, the second quarterly payment will be due before the first one.
  • Identified businesses with a monthly Sales and Use Tax payment due March 20, 2020, will have until April 20, 2020 to make that payment. These businesses should still file their return by March 20, 2020.

If you have any questions, please reach out to your BGM tax professional.  We will keep you apprised of any changes to these arrangements.