The events of the past two weeks will potentially impact the 2019 tax season. I wanted to consolidate with the help of our research service the many moving parts in this event. However, first and foremost, I wish all of our clients good health. These are scary times, but we will get through this.
Now to try and bring some organization to the rapidly changing tax landscape. The following is an update from CCH:
Treasury and lawmakers on Capitol Hill are discussing a planned extension of the 2020 tax filing season beyond April 15. Treasury Secretary Steven Mnuchin told reporters on March 11 that the Trump administration plans to extend the April 15 tax deadline for almost all individuals and small businesses, “other than the super-rich.” Additionally, Mnuchin told lawmakers during a March 11 House Appropriations subcommittee hearing that the IRS would likely extend the tax filing deadline, which would result in “$200 billion back into the economy and that will create a very big stimulus,” according to Mnuchin. “We’re not looking to do that for rich people and big corporations,” he added. An announcement on the issue is expected to be released by Treasury and the IRS in the coming days.
House Democratic Tax Writers
The day before Mnuchin’s comments to lawmakers and reporters, House Ways and Means Committee Democrats sent Mnuchin a March 10 letter asking about such an extension. “We request your continued evaluation of whether there is a need to extend the tax filing season this year beyond the April 15 deadline,” the tax writers wrote. “Further, we are hopeful that the IRS will consider the need for relief form certain filing and payment penalties for taxpayers and communities impacted by COVID-19.”
AICPA Requests Tax Relief for Individuals and Businesses
Additionally, the American Institute of CPAs (AICPA) on March 11 called for tax relief for individuals and businesses. “We are hearing from our members that they and their clients are experiencing great uncertainty about this year’s tax filing season. Our recommendations will help give taxpayers, large and small, much needed relief in the midst of this fast-moving emergency situation,” AICPA Vice President of Taxation Edward Karl said in a statement.
The AICPA has made the following recommendations for Treasury and the IRS:
• Extend certain deadlines falling on or after March 15, 2020 and before October 15, 2020 to give individuals additional time to file and make payments through October 15, 2020;
• Provide an automatic extension to October 15, 2020, without the need to file any forms or request an extension;
• Penalties & Interest: Waive late payment penalties if at least 70% of an individual’s current tax due is paid by April 15, 2020; and waive interest through October 15, 2020;
• Waive underpayment penalties for 2020 estimated tax payments if paid by September 15, 2020, and extend the IRA contribution deadline.
• Extend certain deadlines falling on or after March 15, 2020 and before October 15, 2020, to give businesses additional time to file and make payments through October 15, 2020;
• Provide an automatic extension without the need to file any forms or request an extension;
• Waive late payment penalties and interest through October 15, 2020; and
• Provide appropriate relief for all businesses and tax-exempt organizations regarding elections and filings (including payroll, excise tax, etc.).
Payroll Tax Cut on the Table
Meanwhile, Republican lawmakers continue to discuss economic stimulus measures with the Trump administration. President Trump has been vocal on Twitter about wanting to see a one-year payroll tax cut – a proposal that is apparently still “on the table,” according to Senate Finance Committee (SFC) Chairman Chuck Grassley, R-Iowa. However, at this time Grassley has stopped short of endorsing the idea, saying that he wants to wait instead to see what the economic needs were at the time of the decision.
Senate Democrats Criticize Traditional Economic Stimulus Measures
However, Senate Democrats are criticizing the idea of a payroll tax cut. In a March 11 letter to Trump, 34 Senate Democrats, led by Sen. Mark Warner, D-Va., poured cold water on “traditional” stimulus options. Instead, the Democratic senators requested targeted relief for hourly workers and workers at retail or small businesses who do not have access to paid time off. “Unfortunately, many of the ideas that have been raised thus far have skewed towards more traditional stimulus measures, such as tax benefits for wealthier individuals and corporations,” the Democratic senators wrote. “However, in light of the unique public health crisis, we believe any economic relief package must be crafted to predominately target economic relief for the most affected American workers and their families.” Likewise, SFC ranking member Ron Wyden, D-Ore., in a March 10 statement emailed to Wolters Kluwer, criticized a temporary payroll tax cut under current circumstances. “A payroll tax cut can be an effective tool, but it’s not the best answer in this case,” Wyden said. “A payroll tax cut would do little to help workers without paid sick days or those who have lost shifts and tips.”