Recognizing the economic upheaval that the coronavirus is causing nationwide, Treasure Secretary Steven Mnuchin took to Twitter on March 20, 2020, to announce, "We are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties." The 90-day extension is automatic. Taxpayers don't have to request it.
The day before, Mnuchin had announced that taxpayers could defer payment of 2019 taxes owed for 90 days—up to $1 million for individuals and up to $10 million for corporations, interest, and penalty-free. "All you have to do is file your taxes, and you'll automatically not get charged interest and penalties," he said.
Together, the two extensions mean that small businesses do not have to file their 2019 federal tax returns until July 15, 2020, nor do they have to pay any taxes owed—up to $10 million—until July 15.
Tax extensions have previously been granted for natural disasters, but this is the first time such a step has been taken for a pandemic.
Why was the tax extension granted?
"The government is trying to keep cash in the hands of citizens as the quarantine efforts have drastically slowed commerce. Layoffs have already begun for a lot of individuals, and a lot of businesses are temporarily closing their doors to customers," says Brandon Pfaff, CPA, who serves on the advisory board for Wealthy Living Today.
Part of the goal is to help small businesses remain viable. According to Pfaff, "With no money coming in and fixed expenses like rent and utilities still needing to be paid, Americans are going to be cash-strapped very quickly. Keeping more cash available to consumers and small businesses will hopefully keep the economy on life support long enough for the quarantine efforts to work."
This step "acts as a temporary infusion of approximately $300 billion into the economy by allowing taxpayers to hold their money until July 15," explains Jeffrey Levine, CPA, MST, of Alkon & Levine, PC.
Recognizing a lack of access to accountants
Additionally, with access to accountants diminishing with each new effort to curtail meetings and encourage working from home during the coronavirus outbreak, the ability to submit tax returns by April 15 becomes more challenging for business owners and individuals alike.
"With everything slowed or shut, getting information from clients to complete the returns will likely be more difficult," confirms Mark Misselbeck, CPA, MST, tax principal with Katz, Nannis + Solomon, PC. "We're also dealing with the limited interaction we have by reason of working remotely to get all of this work done," he says.
All of which are reasons the extension provides welcome relief.
State taxes may still be owed on April 15
State taxes, however, may still be due on April 15; check with your state's tax deadlines to be sure. California announced a 60-day state tax extension, and Maryland previously indicated that it would grant an extension to filers if the federal government did.
The only people who won't benefit from this extension are those who have already filed—individuals or small businesses—and paid their taxes, Levine says.