Tax Payments and Deadlines During COVID-19 for Businesses and Individuals
In this webinar, we cover questions regarding deadlines, penalties, interest, forgiveness and loans on the federal and state level.
Below is a transcript of the webinar.
Amanda: So today for your panelists, we have Dan Kruesi and Henry Rinder, licensed Certified Public Accountants at Smolin. We also have Joseph Andolino, a tax attorney with 40 years experience advising corporate taxpayers, entrepreneurs and families about taxes and business.
Henry Rinder: Thank you very much, Amanda. This has been an evolving landscape for sure. And both Joe and Dan will weigh in on this in more detail so you can see what is happening on the federal level and in all of the 50 State jurisdictions and so on. We're going to address the change of deadlines, we're going to talk about what you need to do as far as 2019 and 2020 is concerned. And as far as 2020 is concerned, we obviously will address estimated tax payment requirements. Joe, if you could pick up from here and tell us about what's happening on the federal level.
Joseph Andolino: Happy to Henry. Thank you very much. After the President declared the national emergency and empowered the Department of Treasury to grant relief for postponing due date for federal income tax return filings and payments, the IRS issued three notices that are important, 2017, 2018 and 2020.
So if the return was due after April 1st and before July 15th, the filing date and payment date has been extended until July 15th. So what that means is individual income tax returns, C-Corps, filing date extended, payment date extended, trusts, Form 706 for estate tax returns, gift tax return 709, the same if the date fell within those two dates. For S-Corps and partnerships that were due on March 15th, no automatic extension, but presumably either it was filed or an extension was applied for. There's a lot more meat in 2023. I recommend you read it. And if you have questions, just ask them of us and we will, at the end of this, try to respond. There's a lot of questions that people have, but I think the dates April 1 and July 15th is the most important.
And just one last thing, if you need an extension beyond the 15th of July, you can apply for one, but it's only for filing, not for payment. So payment is due July 15th. So economically, what you have is for any unpaid tax, you have an interest free loan from 04/15 until July 15th. Okay? Can we go on to the next slide please?
Henry Rinder: Joe, on the next slide, we deal with employment taxes. So could you address it please?
Joseph Andolino: Yes. Employment tax deposits and payments are deferred. And I'm talking about employers' portion of social security tax and certain railroad retirement taxes. They're deferred after, if they're due after March 27th through December 31, 2020. And again, details are provided on an IR notice and in the statute, the CARES Act, I think it's section 2023. And that is a plenary applies to all employer portion of the social security tax and certain railroad retirement taxes. Now, the deferral is for a full year period and then some because payment need not be made until December 31, 2021 for 50% of the deferred amount, and then December 31, 2022 for the remaining portion. Now this is a deferral for payment. It is not a deferral for filing the report. So the way I read it, the 941 that's due at the end of April needs to be filed. And if there's any portion that's deferred, it needs to be noted on the report. Now, interestingly enough, in the IRS notice they say that the 941's for the second quarter are going to be modified to make that clear.
The exception to this is that deferral is not permitted if a tax payer has requested a PPP loan and has received notice of forgiveness or forgiveness. At that point, the deferral of payment or deposit has ceased. It applies to employers and 50% of the self employment tax. And again, if there's any questions, just send them along.
Henry Rinder: What about the collection activities? I'm sure that's the point that you wanted to make. Go ahead.
Joseph Andolino: Yeah. This is one of the most interesting things actually I've ever seen come out of the IRS, in terms of the language that's used. They have initiated something called a People First Initiative. And the commissioner, and I think a first impression that I know of, has done a number of very interesting things. Generally collection activities are suspended. Absent exigent circumstances and executive approval, IRS employees are not supposed to meet with taxpayers, execute powers of attorney issue final notices, or one of enforcement action, request new federal tax liens, issue new levies, take seizure action, issue summonses to third parties, send letters proposing investigation, or pursue civil proceedings. In addition, they will not default an installment agreement if payment is not made between April 1 and July 15th. So no need to make those payments. The IRS will not initiate default.
They are obviously trying not to meet with them people because of COVID-19. And I think essentially, if you go through the People First Initiative, which is on the IRS website, or there's a March 30, 2020 control number, if you need to write this down, SBSE0503200030. I'll repeat that. SBSE0503200030. The lack of collection activity is only overwritten in the event of a statute of limitations running. And in that case, if it's extended, they will not issue a notice of deficiency and it will essentially be suspended through July 15th. I think it's remarkable actually, because it's unprecedented. And that's what I have Henry.
Henry Rinder: Thank you very much, Joe. Fantastic. And then the next slide that we have here addresses what's happened on a State level. And if you could pick it up from here and tell us about your adventure of kind of tracking this particular area, which I know has been very challenging for us. Dan?
Dan Kruesi: Okay. So I'm going to go through a series of lists. There's not going to be much theory, it's just going to be a black and white, just going through lists. But these lists are very fluid and in the last few days I had to change them multiple times, even from last night having my list through this morning, I had to change and remove some States, which is a good thing because a lot of the States you would think would automatically file the federal and that is not the case. Largely with individuals, that is true. There's a couple of bad apples with the States where that's not true. Maryland, not even a week ago, basically was on, that I had to take that off. But when we go through, you'll see that there's quite a few States, particularly when it comes to partnerships and trusts, which a lot of times don't fall into the definition for some of these States of when they go to extend them. And we'll go through these lists and you'll see. Pay particular attention when it comes to the pass through entities and trusts that there are more States than you probably anticipated that are not following the federal extension deadline.
Henry Rinder: Can we go to the first slide on New Jersey?
Dan Kruesi: Okay. So New Jersey did a pretty good job, considering that a lot of people thought, "Oh, New Jersey's following." I could understand a lot of people were saying, "Oh, I thought that they allow the due date to change the filing date, but not the payment date." A lot of that is all false. Nothing was ever done until today became official. Yesterday, the two branches of the legislature wound up passing it. And I believe Governor Murphy signed that today into law. So for the most part, there was also confusion and, oh, are they just going to have individual gross income tax? Is it just going to be corporations or are they also going to have trusts= and partnerships? And so they did a very good job. If you go onto the website, the New Jersey division of taxation and you look where there's COVID-19 extension, you'll get what we're looking at here. And basically they will tell you that for 1040s, 1041s, 1120s, 1120S's, they've all been extended. They've been extended to July. And in addition to that also with the 1040s, with your first payment, that is also extended. But for the second payment in June 15th, you will need to make that payment. Okay. So the next slide, please.
So this is still law for New Jersey basically looking there that when it comes to corporations and S-corporations, that they are going to make that extension also to July 15th. Next slide please.
Okay, this was something that a lot of people were worried about. I was, I didn't think they were going to extend this. I think the New Jersey CPAs also thought that this could be in jeopardy, but they are extending partnerships also to July 15th. So that's a good thing along with trusts are going to be extended as well to the July 15th deadline. Next slide please.
Okay, so this is for the individuals now. There are only three States, now really two, that are not going to follow the July 15th deadline. The first one is Oklahoma. That due date is April 15th. The payment due date will be July 15th, up into $1 million. Virginia, you have to file on May 1st, not July 15th for the due date. And for Virginia, it will be June 1st to make the payment. New Hampshire, which has a return for just interest in dividends, that due date and the payment date is April 15th. Other than that, all the other States are extended to July 15th for individuals. Next slide, please.
Okay. For C corporations, these are the States that are not following the July 15th deadline. There's quite a few of them. They could probably catch you off guard even if it isn't an April 15th deadline, it's due tomorrow. Some of the States like Connecticut, that's going to be June 15th. Florida State is at May 1st. Montana is May 15th. You're going to still have the commercial activity tax with Ohio. That is not extended. That's due May 10th. Oklahoma, just like it has for individuals, the due date will be April 15th and the payment date will be extended to July 15th. And Virginia, also, that will have a due date of tomorrow, but a payment date of July 15th. Also Minnesota is also another State where you're going to have to file tomorrow. All right, next slide please.
Okay. So this is for S-corporations. All right. A lot of people think, "Oh, S-corporations to States, you might file 3/15." There's a lot of States that have 4/15 and not 3/15. It's probably a mixed bag, 50/50 of each. So these are the States that you're going to have to file tomorrow. There is no extension for July 15th. And for most of these, you're going to have to make a payment. That would be Alaska, Connecticut. Connecticut has a due date of tomorrow, but the payment is due June 15th. So that's something if you don't put in your calendar, you can easily miss. Delaware was actually April 1st. They didn't have an extension. Ohio is June 15th. Kansas is tomorrow. New Hampshire is tomorrow. Again, if you have a commercial activity tax with Ohio, that'll be May 10th. Oklahoma, that again, a due date of April 15th, but a payment up to one million will be July 15th for Oklahoma. And Virginia is due tomorrow. So no extensions to July 15th for those States. Okay. Next slide, please.
These just listed below are some States that the deadline has already passed already. They're not extended. These were States that would have been due on March 15th; Alabama, Arizona, Illinois, Minnesota, Mississippi, Montana, Nebraska, New Mexico and New York. They did not extend these. So you're late on these. All right, next slide please.
Okay. This is what partnerships. You could see there's quite a few of them. This was something I was more concerned about than the others with the corporations and the individuals. But with the partnerships, you could see there's a lot of them that they're due tomorrow, which would be Alabama, Arizona, Connecticut. So you have your payment to July 15th. Illinois, Kansas, Michigan, Minnesota, Oklahoma, your due date is tomorrow, but you have until July 15th up to a million dollars to pay that. And Virginia, April 15th. There's a few that basically still come back in May. You could easily forget that. That would be Alaska and Florida, that you're also going to have to worry that you might be able to miss that date. So you could see there's quite a few partnerships. And if you have multi-state returns, you could easily miss these, so it's not July 15th. All right, next slide, please.
This was the below, same thing that I went and I did with the S-Corps. There are quite a few partnerships that are basically filed on March 15th with what looks like there's probably about 12 States here. None of those were extended. If you didn't file an extension on those, those returns were late. Next slide please.
Okay, trusts. There are 16 States that are not following the federal 15th due date. Actually, I have 15, I think it's down one, two. Yeah, there was actually more of these last night. A couple of them got removed, I believe Connecticut and Pennsylvania. But you could still see and I'll just rattle them off. So you have a bunch of States that if you have trusts and they are due tomorrow, it is not extended unless you go and file for an extension, but your payment will still be due. That would be Colorado, Washington, DC, Georgia, Idaho, Indiana, Iowa, Louisiana, Minnesota, Mississippi, New Hampshire, Ohio, Oklahoma, Oregon, and West Virginia. Virginia's is due on May 1st. Next slide. And here's just another thing I want to throw out there. It is possible still that one of these States, or two of them, could get removed from this list by the time it is tomorrow. A great is New Jersey. We were up in the air on that. Some of the other States go by. If you do think that they'll show up on this list and you're late, it would be a good idea to still go on that State's website, see if maybe there was a last minute change.
All right. The last thing that I'm going to talk about besides the States or the FBARs form 114. Okay, well that has an automatic extension already to October 15th. It wasn't anything that the US Treasury did new where they said, "Okay, well, we're going to extend this out to July 15th or October." There is an automatic extension. So the deadline for that is October 15th. So if you plan on filing this form, along with the 7/15 deadline, you don't have to do anything special. It's already extended for you. Next slide.
Okay, so here's the thing. I think this is the last thing, but I do want to touch on another, a locality instead of a State, which is New York City. So in New York City, when it came to businesses, did not provide a lot of information. And as of today's date, if you have a UBT return or if you have a C-corporation return, that deadline is tomorrow. Payments are also due tomorrow for the UBT and C-corporate returns for New York City. The only exception is they say that they will not charge any penalties until April 25th. So if you file and pay by April 25th, you should not have any penalties. However, they are mute when it comes to interest. So I'm assuming that they would most likely still charge you an interest if you wanted a filing by April 25th for New York City. Okay. So I think that's it and I think we could probably open up the questions, which gives us about seven minutes for that.
Henry Rinder: We have this other slide. I just wanted to pose a question then on the estimated tax payments for 2020, if you could address that.
Dan Kruesi: Okay. So the estimated tax payments across the board, everyone's expecting the second estimated payment to being made on June 15th. However, for the States that went along and followed the individuals where you could see there was only three that were not included in that list. All of those in the federal government, your very first estimated payment, which was due tomorrow, that has been extended until July 15th. Which is a little strange that your first estimated payment will get extended to July 15th, but you have to make your second estimated payment on June 15th. You might be able to get around that by paying in a larger extension amount when you file your return if you do happen to miss that June payment. And that would be applied an overpayment and that should take care of you with your June 15th payment.
Henry Rinder: Good point. Amanda, do we have questions from the audience?
Amanda: We do. So we have one question that asks, I know that you guys had mentioned previously about deferring if you had a PPP grant. And that was the question. So why would you defer if you got a PPP grant for a Payroll Protection Program grant?
Joseph Andolino: I guess the question is of me. And when you say defer, I guess we're talking about deferring the deposit of the employer's portion of social security tax. And just for the simple reason, don't differ when you get the grant. Excuse me, you defer even if you get a grant. You must stop the deferral and begin paying the payroll taxes when you get notice of forgiveness. And that's in the statute, which is section 2302 of the CARES Act. And it's also in the notice that the IRS published. So you stop deferring payment of the employer portion of social security tax when you get notice of forgiveness.
Henry Rinder: So if I may paraphrase, Joe, clients should be actually applying for PPP and deferring employer portion of the social security tax. And it's not until the forgiveness is considered. So in other words, if the PPP gets forgiven from that point on your deferral should be forgone and you should just pay the taxes at that moment. Correct? Am I paraphrasing you correctly?
Joseph Andolino: Yes. It's clear that that's the rule. It's very clear. Here, I'll give you the Q&A. Can an employer that has applied for and received the PPP loan that is not yet forgiven defer deposit in payment of the employer share social security tax without incurring failure to deposit and failure to pay penalties? Yes. If you've gotten a loan, but it's not yet been forgiven, you may defer deposit and payment of employer share of social security tax. Once an employer receives a decision from its lender that it's PPP loan is forgiven, the employer is no longer eligible to defer deposit and payment of the employer's share social security taxes due after that, period.
Henry Rinder: That's terrific. Amanda, any more questions?
Amanda: Yeah. So we had another question, are most of the larger payroll companies handling this for clients, or is this something that they should be checking in to make sure that's actually happening?
Henry Rinder: So maybe I'll pick that up and then feel free to weigh in. But I've been telling my clients to talk to the providers and every payroll provider is slightly different. So you have the majors, ADP and Paychex and so on. And I understand they actually are set up to address it. I am not sure about smaller payroll companies, whether they have the wherewithal to actually execute on it. But I'm sure that most of them will eventually set themselves up to be able to defer the employee portion pursuant to this CARES Act. Dan, anything to supplement that?
Dan Kruesi: No, I would agree with you. You would think that they would already be on board with this. However, we have seen when the Payroll Protection Program came out, they did have some literature that came out that was not completely on target. And so it would of course make sense to basically at least check out your first two payroll to make sure that they're actually complying and sending you that kind of money.
Henry Rinder: Amanda, we still have time for a question or two. So any more questions?
Amanda: Yeah. So another one was, has the IRS provided e-signature authorization on forms to allow e-filing without needing to meet in person?
Dan Kruesi: Yeah. Well, that's a very good question. I'm going to be honest with you, I didn't really go and research that. But I did see yesterday, I did come across something that said that they were accepting that. I'm not going to go out on a limb and say, "Dan Kruesi said that." Go double check that. But I did see that they are accepting that.
Henry Rinder: Joe, do you know?
Joseph Andolino: I don't know. I guess I would say with respect to the deferral of filing and payment that was granted, it's automatic. There's no need for an extension request to be filed. It's automatic if you qualify, if the return is due between April 1 and July 15th, everything extended until July 15th automatically. I honestly don't know if they take e-signatures. I mean, generally the IRS is, I want to say this gently, not the most technical. I mean, they're the only organization I know of that uses faxes to this day. I guess there's a reason for it. But I mean, if State law says an e-signature is a signature, I wonder why it doesn't apply, would be my question. But I honestly don't know and I don't know of any litigation on it. If anybody out there knows, I'd love to hear about it.
Henry Rinder: Amanda, we actually are coming to an end of the webinar. We probably have time for one more question. So let's give it a shot if you have one and then we'll wrap it up afterwards.
Amanda: Yeah, sure. Let me just take a look. I thought we were going to be wrapping up. I know a lot of these are changing pretty constantly, so to stay up on all of them. So it is helpful, I think, to always check in to make sure that what is today is also what stands tomorrow. One of the questions that we've been on here is that the extension deadlines have been extended, but what is the case with interest? And are there going to be any adjustments or kind of relief provided for that in the future?
Dan Kruesi: It's interest in penalties. The only locality that I've seen that isn't filed, that is New York City. That's why I brought that up. They were silent when it came to interest, but it's interest in penalties.
Henry Rinder: Thank you, Dan and thank you, Joe. Thank you, Amanda. This was well done and I know that it required basically, hour-to-hour monitoring because this is such a changing landscape. And obviously I wanted to thank all of the attendees of today's webinar for joining us. If you do have questions that were not answered, please email them to us and we'll have somebody get back to you in a timely fashion. Again, thank you very much for joining.