At a time when the Covid-19 is grabbing the world in its grip that is becoming increasingly tenacious, the Trump administration has made a major announcement. In order to provide relief to the population and American businesses, the IRS deadline for paying taxes has been extended by 90 days. This has been announced part of the administration's emergency relief plan after it announced a national emergency a few days ago.
So what does this extension mean? This guide simplifies this official announcement.
People and businesses will still have to file their taxes by the traditional deadline of April 15. The 90-day extension applies only to the tax payments you will be making. The date for filing you income tax returns is the same.
The IRS hasn’t yet released the elaborate details of the program. The payments have now been made due on July 15. The traditional option of requesting 6-month extension is still open if you have any difficulty in filing your returns on time.
There is an exclusion to this new announcement, however. Individuals whose taxes amount to over $1 million and corporations with taxes over $10 million cannot take advantage of this date extension.
There is still no clarity about trusts and individuals who pay their taxes quarterly. If you make quarterly payments, you may still be needed to pay the first payment by the traditional due date.
The announcement, however, makes it clear that individuals and businesses that qualify for this extension and wait to make their payments will not have to worry about any penalties or interests. On the subject of refunds, it has been recommended to continue filing tax returns the usual way. It is worth noting that returns are still being processed and refunds are being sent out by the IRS.
This is a federal government announcement and it doesn’t affect the rules of state taxes. As a taxpayer, you will have to check with your state authority to learn about any potential changes in the due dates.
You should know that some states have been proactive and have followed the new federal guideline. However, others are still in the process of creating their own new deadlines.
Maryland and California are two states that have made adjustments to tax requirements.
The impact of the federal government’s announcement on the economy is still being evaluated. However, according to the Treasury Secretary, this is going to help keep up to $300 billion back with the taxpayers. This amount is expected to benefit the economy.
Allowing some extra cash in the hands of people and business can help increase liquidity and prove to be beneficial for an economy that has already been struggling under the overall impact of the coronavirus pandemic.
However, some are speculative and think that the benefits are not going to be significant. It is going to create a delayed tax bill and only 75% of the taxpayers get their refunds every year.
Out of the 150 million individual taxpayers, 68 million have already filed their tax returns. It is the higher-income taxpayers who tend to file their returns later. Many experts believe that keeping money in this groups hands is not expected to be helpful to the economy because these individuals are less likely to spend it.
Spending and revenue streams are expected to be affected due to the pandemic. The billions in potential tax payments that have now been delayed are expected to contribute in one way or the other to stabilize the market.