Very few aspects of American life, if any, remain unaffected by the coronavirus. Taxes are no exception.
On Tuesday, March 17, US Treasury Secretary Steven Mnuchin announced during a White House briefing that the IRS will waive interest and penalty charges for 90 days for Americans who owe taxes.
The Treasury Secretary did confirm that the tax-filing deadline for individuals remains April 15.
What does this mean for the average American, if you owe a payment to the IRS, you can defer up to $1 million as an individual — and the reason we are doing $1 million is because that covers pass-throughs and small businesses — and $10 million for corporations, interest-free and penalty-free for 90 days. All you have to do is file your taxes.
The IRS is so far processing tax returns and paying out refunds with no apparent delay.
Some individual states, including California and Connecticut, have extended state tax return filing deadlines for residents.
Here are a few reasons to file your taxes now.
1. File now if you want your refund
As of now, the IRS will continue to process tax returns and pay out refunds as usual. If you’ve been looking forward to getting a check from the government, you’ll need to file your return to get it.
The IRS recommends filing early and choosing direct deposit to get your refund as soon as possible. Nine in 10 taxpayers who use this method and are owed a refund typically get theirs within 21 days of submitting their return.
As of the first week of March, the average taxpayer receiving a refund was getting about $3,000, according to IRS statistics. If your job doesn’t support remote work or you’re on unpaid leave during the coronavirus outbreak, you’ll probably want the extra cash.
2. You won’t be totally off the hook for your tax bill
Typically, if you don’t pay any tax you owe by the tax filing deadline — April 15 — the IRS will charge you a penalty and interest on your outstanding balance.
The IRS announced on Tuesday that individual taxpayers could defer up to $1 million in tax payments for 90 days. Deferment is just postponement; barring any additional government relief, you’ll have to pay your balance when the deferment period is up. The upside is that you won’t be charged interest or penalties during this time.
The financial markets are in bad shape right now and it’s trickling down to our wallets, but there’s no telling how bad it could get. If you have the money to pay your balance, you might as well get it over with. There is an exception, though, if you owe a lot, and the interest is waived, it won’t hurt to wait.
3. If you don’t file now, you’ll have to do it later
The IRS is not extending the tax deadline, so if you don’t file by April 15, you may still be charged a separate penalty for not filing. If you can’t begin to think about gathering all your tax documents and sitting down to file — or contacting an accountant to do it for you — consider requesting an extension as soon as possible.
But while an extension is appealing to the procrastinator in all of us, it is good to take care of the important matters first. The US tax advisors at Grant Thornton Israel are available to discuss this issue and all your US tax matters with you.