Coronavirus and Your 2019 Tax Returns

The effects of the coronavirus have now crept into almost all aspects of our daily lives so it is only fitting that it should have an impact on your 2019 tax returns.  What can you expect to happen in this arena in the coming days?

Treasury Secretary Steven Mnuchin-March 11, 2020

On Wednesday March 11, Secretary Mnuchin testified before the House Appropriations Committee concerning Treasury’s plans and administrative authority to delay the coming April 15 tax filing deadline along with the deadline for paying taxes due.  Experienced taxpayers know that they can obtain an automatic 6-month filing extension, but that did not extend the time to pay taxes due.  Quotes from Secretary Mnuchin include:

  • The proposed delay would apply “to virtually all Americans, other than the super-rich.”
  • “For small and medium sized businesses, for hardworking individuals, we are going to recommend to the president that we allow the delay and that they don’t have to pay an interest or penalty on that.”

This plan was being touted as an economic stimulus move, by leaving $200 billion in the economy that would otherwise have been paid to the IRS.  In essence, this would be a short-term loan to the taxpayers.  While one doesn’t expect to receive all the specifics until the plan is fleshed out, the obvious questions are:

  • When would the tax filing and final payment be due?
  • What are the definitions for “super-rich”, “hardworking” and “small and medium sized businesses”?

Secretary Mnuchin also discussed Treasury’s options for funding the federal government while these tax payments are delayed.

While the Treasury Department and the IRS may have administrative authority to delay filing and payment deadlines for federal returns, what would happen with respect to state tax return filings and payment deadlines?  That would be a state-by-state decision, but it is important to note that states do not have all the funding options available to the federal government.  However, it is not hard to see that the states would be under great pressure to conform to any federal delays.

President Trump March 13, 2020

On Friday March 13, President Trump formally declared a state of emergency over the Coronavirus, which triggers a number of aid programs and gives the federal government greater flexibility in dealing with the situation.  As part of this declaration, the President’s letter states:

I am also instructing Secretary Mnuchin to provide relief from tax deadlines
 to Americans who have been adversely affected by the COVID-19
emergency, as appropriate, pursuant to 26 U.S.C. 7508A(a).

Details will be coming soon, but once again, new questions arise.  Will tax deadline relief under this declaration be calibrated based on one’s income level as previously suggested by Secretary Mnuchin?  Will all Americans automatically be deemed to have been adversely affected by COVID-19 or will there be some criteria?  (I am running low on toilet paper-does that count?)

What should you do?

While we await the final details of tax deadline relief,(which could be issued before the article is published) what should we do?  If you are healthy, my advice would be to prepare to file as you might under normal circumstances.  If filing and payment relief is indeed offered, you can hold the completed return and payment until the new deadline.  Besides, what else do you have to do?  Your spring break ski trip is in ruins, your cruise has been cancelled and you cannot watch the NBA, NHL, NCAA, MLS, MLB or PGA golf.  The task of tax preparation will provide a good diversion.