On March 17, the IRS announced that it would be deferring tax debt payments for all Americans by 90 days due to the COVID-19 pandemic. This announcement comes in the wake of new government guidelines recommending the shutdown of many businesses, the closure of schools, and extreme social isolation for all citizens. The hope is that this deferral will not only offer some much-needed financial relief to impacted Americans, but that it will also assist in flattening the curve and slowing the spread of the virus. Here’s what you need to know about this deferral, its limitations, and its impact.
Automatic Deferral for All Debts
The 90-day payment deferral is being automatically given to all United States taxpayers. This will give you until the middle of July before you have to worry about paying any taxes you may owe. Current projections estimate that the pandemic should be largely behind us by this time, and hopefully most of life will have returned to normal. This should give most taxpayers enough time to deal with their more pressing financial needs related to the outbreak, and worry about tax payments after they have returned to work again.
Caps on Deferral Amounts
While the deferral is being automatically given to all taxpayers, it does have certain limitations. The IRS has placed a cap on just how much tax debt you can defer for those 90 days. However, the cap has been set at a very high amount, so it should not impact the majority of Americans.
Individuals can defer up to $1 million in tax debt while businesses can defer up to $10 million. Any amount owed over these numbers needs to be paid by April 15; the rest can be automatically deferred for the full 90 days.
Filing Deadline Also Extended
On March 20, the IRS announced that it would also be extending the filing deadline, so you now have until July 15 to file and pay what you owe. Hopefully, this will remove one item from the long list of stresses you are dealing with at this time. Of course, we still recommend you file as soon as you are able, but hopefully this extension will give you a little breathing room if you're dealing with virus-related stressors.
How Does This Help Slow the Spread?
As mentioned, this deferral is being offered not only in the hopes of offering Americans some much-needed financial relief at this difficult time, but also in an attempt to help flatten the curve and slow the spread of COVID-19 throughout the country. How does a payment deferral do this?
First and foremost, the deferral relieves some deadline-related pressure on the IRS and tax preparers alike. This is an incredibly busy time of year for those in our line of work, and that often means working long hours in crowded offices. By deferring payments, much of the work is being spread out more—not only at the IRS, but in our offices as well. This enables workers to spend less time in the office and work from home more frequently, limiting contact between coworkers.
It also relieves the pressure on our clients and other taxpayers so that they can make the choice to stay home instead of feeling forced to meet with their tax preparer in order to ensure their taxes are paid on time. Of course, as mentioned, you’ll still need to file on time; but by removing the strain of paying right away, the hope is that more taxpayers will stay home.
And finally, the financial relief this deferral can provide also makes it more possible for many workers to stay home. Rather than being forced to go into work in order to make their tax payments on time, these individuals can stay home, practice proper social distancing, and hopefully slow the spread of COVID-19.
Are We Still Working?
If you’re worried about being able to contact us during this time of great stress, breathe easy. Demian & Company is still here, working to meet your tax preparation and other accounting needs. While we may be working shorter hours, and many of our tax preparers may be working from home at times, we are still doing everything within our power to provide you with the help you need.
If you have an upcoming appointment with us, we encourage you to consider utilizing our remote services. We can provide you with the same level of service via phone or video call, and you can send us your tax documents via fax, email, or our secure client portal. Contact us today to learn more about our remote services. And above all, stay safe and stay healthy!