Keeping You Up To Date For April 15th

We wanted to send out an update on the tax filing situation as we know it now.

We have been advising everyone we speak with over the past few weeks that this is an ever-changing situation and to expect misinformation and significant changes in what we thought we knew. While we don’t know for sure, we think there will be many more changes coming. Thankfully the IRS has just released some additional guidance that has made our world a little less unsure.

On Thursday April 9th the IRS issued a revised notice that provides more explicit relief for most tax items due beginning in April 2020. This relief covers all Federal tax payment obligations and Federal tax return or other form filing obligations that are due, either by regular due date or on extension, due between April 1, 2020 and July 15, 2020.

This notice covers virtually every deadline that any taxpayer would be subject to between April 1 and July 15, extending the due date to July 15. This means that any return or payment that would have otherwise been due between these dates is now due on July 15th. For most taxpayers this covers all returns and payments, including estimated tax payments that would have been paid between April 1 and July 15. Now those returns and payments are due on July 15th.

This situation is changing so rapidly that states are having a hard time providing timely information on the relief they are providing. In most cases it appears that the states will provide similar or equal filing and payment relief to what is available at the federal level. We’re approaching our normal April 15th deadline, and in some cases the states either have not acted, or perhaps because of state law they are unable to act as quickly and decisively as the Federal government. This has left us with some uncertainty.

Currently all states with a personal income tax have extended their April 15th filing due date. 39 states, including North Carolina, have extended filing and payment dates to July 15th.North Carolina still has an uncertainty looming over residents. The due date for all returns due on April 15th has been extended until July 15th. Tax payments, which include personal income tax, corporate income tax and other taxes, will not be charged a penalty if they are paid in full by July 15th. We believe that this payment relief also extends to estimated tax payments that would otherwise be due on April 15th, but guidance has not been clear.

The NC Dept. of Revenue and the Secretary of Revenue has said that NC will mirror the IRS changes as much as possible under current law. This leads us to believe estimated tax payments are also due on July 15th, but we believe the reason NC has not been clear on this issue is because state law prohibits the Department of Revenue from waiving interest charges on any late payment of taxes. Some of the charges imposed on late payments are considered interest under NC law. Until the Legislature meets and passes a law waiving interest charges, any payments due on April 15th that are not paid until later will be charged interest at a rate of 5% per year. Currently the NC Legislature is scheduled to convene on April 28th and it is expected they will address this issue shortly afterwards.

Other states have generally also waived penalties, and in most cases interest, on payments due on April 15th. If you’re filing a return in a state other than NC, please contact our office for more information on how your state is handling this crisis.

So, what do you do? If your return has already been filed, but you’re waiting to make your payment, you can wait until no later than July 15th to pay your federal balance due, and any estimate if applicable, and your payment will be treated as if it was paid on April 15th.

If you live in North Carolina and have either a balance due or will pay a first estimate, normally due April 15th, and you elect to delay paying one or both of these payments beyond April 15th, you will be charged interest at a rate of 5% per year until the payment is made unless the NC Legislature takes action to waive the interest charge.

If you are filing a return in another state, and you owe tax or need to pay a first estimate, please contact our office and we can tell you if your state has waived interest, penalties, or both.

Please note that if you’re paying Federal estimated tax payments, not only is your first estimate payment, normally due April 15th extended, but also your second estimate payment, normally due June 15th, will now be considered timely paid as long as it is paid by July 15th.

While some questions are answered, there are still plenty of questions that are unanswered. There will be many more changes and hopefully some clarification over the coming days, weeks, and months. Many of these issues will be more clearly addressed but right now, there are so many things we don’t know.

Our advice is to do the best that you can to meet all the deadlines as they are currently. We believe that until this crisis shows signs of improvement, there will be more relief. If you’re unable to work, how can you be expected to pay your taxes? If you’re quarantined at home, how can you file a tax return? If there is not widespread relief granted on filing dates, there will be a lot of returns filed late and a lot of taxes paid late. Late filing and late payment will generate notices. Millions of notices will have to be responded to and an already over-burdened IRS will not have the resources to handle them.