DEFERRAL OF U.S. TAX LIABILITIES - INDIVIDUALS AND COMPANIES
Deferral of U.S. federal tax filing and payment date
As of the latest guidance issued on March 20, 2020, the IRS and U.S. Treasury have automatically extended both the filing and payment deadline for U.S. federal taxes by 90 days, from April 15 to July 15, 2020. Interest and penalties will not accrue before the new July 15 deadline and there is no cap on the amount of deferral.
In addition, the first installment of 2020 quarterly estimated tax payments for businesses and self-employed individuals is also deferred to July 15.
For multinational companies and individuals expecting to pay tax on assets brought back from overseas under the Section 965 repatriation tax rules introduced in 2017 under the Tax Cuts and Jobs Act of 2017 (TCJA), the IRS has clarified that the due date for these Section 965 transition tax installment payments is covered under the 90-day payment extension (even though the tax liability originated from the 2017 tax year).
Deferral of State tax filing and payment dates
The federal developments do not affect the filing of state tax returns and their payment deadlines, however, many states have also delayed their filing and payment deadlines. The department of revenue for each state must be monitored for any similar actions. For example, California already has announced a filing extension to July 15, 2020, while New York has not yet announced any such decision.
State tax filing developments can be tracked here.
New Covid-related U.S. Federal Tax Initiatives
The IRS has published information for small and mid-size employers (with 500 or fewer employees), advising these businesses how to claim new refundable payroll tax credits for providing paid sick and family leave to employees. The Families First Coronavirus Response Act was signed into law on March 18, 2020, effectively to reimburse such companies for providing up to 12 weeks of paid leave to workers dealing with COVID-19-related health issues, including staying home to care for school age children. More information can be found here.
IMPACT ON TAX COURT CASES AND TAX AUDITS
The U.S. Tax Court building is closed and the handling of tax-related court cases and IRS audits in the face of COVID is rapidly evolving. The IRS website should be monitored for developments.
The Senate continues negotiations on proposed COVID-19 related legislation. We will of course keep you informed of any new U.S. tax measures that are adopted in the coming days.
This legal update is not intended to be and should not be construed as providing legal advice. The addressee is solely liable for any use of the information contained herein and the Law Firm shall not be held responsible for any damages, direct, indirect or otherwise, arising from the use of the information by the addressee.
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