Please note that this blog is based on laws effective March 18, 2020 and may not contain later amendments. Please contact Cray Kaiser for most recent information.
This afternoon, the IRS issued formal guidance on tax payment relief. Notice 2020-17 establishes the following:
- Every individual or entity with a Federal income tax payment due April 15, 2020 is considered an “Affected Taxpayer” for purposes of relief. Meaning, you don’t need to be physically affected by the virus; if you have a Federal income tax due on April 15, 2020, you qualify for the relief.
- The relief means that all Federal income tax payments due April 15, 2020 have an extended payment due date of July 15, 2020. This includes not only balances due on April 15, 2020 (generally your 2019 tax liability), but also first quarter 2020 federal estimated tax payments due April 15, 2020. The limitation on this relief is capped to $1 million for an individual taxpayer regardless of filing status. Relief is capped at $10 million for corporate taxpayers.
- Interest and penalty accrue above these caps starting on April 15, 2020 (no relief). Meaning, if you are an individual with a 2019 tax liability of $500,000 and a 1st quarter estimate due of $600,000, for a total of $1.1 million, the excess $100,000 tax due is subject to interest and penalty starting on April 15, 2020. Interest and penalty will not begin to accrue until July 16, 2020 for amounts under this cap. No guidance has been provided regarding federal tax payments due between April 15 and July 16, 2020 – namely the 2nd quarter estimated tax liability.
Keep in mind the Notice only deals with payment relief, not filing relief. Based on our understanding of the law, valid extension requests of time to file will be required.
The Notice also does not mention relief of any other federal taxes, including payroll taxes. As such, it’s critical that if cash is tight, you continue to make payroll tax deposits. Failure to do so can be very costly.
Finally, we are still awaiting guidance from a number of state tax authorities including Illinois to determine what filing and/or payment relief might be available. We will continue to keep you abreast of developments as they come.
CK OFFICE OPERATIONS
These are certainly trying times and we want to reiterate that Cray Kaiser is here for you. As things continue to evolve in light of the COVID-19 pandemic, we at CK are taking additional precautions for the benefit of our team members and our clients.
- No clients or guests will be allowed in our suite.
- All in-person meetings are cancelled. Instead, we will be utilizing phone calls and/or email to communicate with our clients.
- Our team members are being encouraged to work remotely. All staff are equipped with the appropriate technology and resources to continue to securely and confidentially serve you from home.
- We will no longer have in-person drop offs of accounting/tax data. Instead, please drop off any packages outside the office door of our suite in the box provided.
- All paper files, tax returns etc. will no longer be mailed by our office to you. We will be holding these items in our office to send to you at a later date.
CK PORTAL ACCESS
We want to remind our clients of our portal access and your ability to safely and securely share your information with our team. We ask that you email firstname.lastname@example.org to request your portal access. This will eliminate the need for you to drop off your tax information at our office.
Thank you for your patience and understanding during this challenging time. We wish you, your family, and your business health and safety. We will continue to support you as best as we can while keeping each other’s health a priority. If any changes occur during the course of the next few days, we will update our website.