U.S. taxpayers were given an additional three months to file tax returns this year because of the coronavirus crisis, but even the extra time hasn’t been enough for some businesses struggling to pay the government as the pandemic threatens to worsen.
While the shift to the July 15 deadline was meant to help filers weather disruptions caused by virus-related shutdowns, companies are facing the added problem of navigating a confusing and constantly changing patchwork of disaster relief at a time when the work of the Internal Revenue Service has been slowed along with the rest of the nation’s economy.
“This is the never-ending tax season,” said Steve Rossman, an accountant at Philadelphia-based firm Drucker & Scaccetti. “July 15 is just as bad as April 15, plus there are all these other nuances, like helping clients with their Paycheck Protection Program loans.”
Further complicating matters, many firms that welcomed relief in the spring are now faced with potential cash crunches as multiple bills come due at the same time: any income taxes they owe for 2019, as well as their estimated tax payments for the first two quarters of this year, which were also delayed.
Deadline day comes with the U.S. facing a spike in the number of coronavirus cases in states including Florida and Arizona and steps by some others, such as California, to re-close parts of their economies to try to stem the pandemic. Congress is beginning negotiations to pass another relief bill by early August that could include an extension of unemployment benefits, another round of stimulus checks and more business tax breaks.
Payment options
The IRS said in a statement Monday that taxpayers should file a return by July 15 “regardless of whether or not they can pay in full.” The agency offers several payment options, including delayed collection or a process to compromise for a lower liability.
The traditional April 15 deadline was pushed back at a time when companies were living in the nightmare of a broad economic shutdown while trying to navigate a makeshift system for obtaining federal relief, such as PPP loans or payroll tax deferrals. They were met with repeatedly revised rules and a lack of access to professional tax help that left many of them fending for themselves in applying for desperately needed aid, said Rick Lazio, a senior vice president at AlliantGroup, a tax consulting firm.”
“A lot of businesses may not be operating on the latest guidance,” said Lazio, who served in Congress as a New York Republican. “If you don’t have a sophisticated tax adviser, it can be very easy to miss all of the changes.”
The internal watchdog for the IRS acknowledged the concerns facing businesses and other taxpayers in a
‘Essential functions’
“The IRS has not been able to perform many of its essential functions as a result of the pandemic,” the Treasury Inspector General for Tax Administration said in the report. “Trying to balance restarting operations with employee safety will challenge the IRS to provide quality customer service, deliver the filing season and enforce compliance with tax laws.”
The IRS backlog and companies saying they needed more time led some business groups and the National Treasury Employees Union, which represents the agency’s workers, to ask Treasury Secretary Steven Mnuchin for another delay.
Mnuchin
The decision to keep the July 15 date may ultimately help some taxpayers avoid racking up large tax bills that they’d be unable to pay later on, said Pete Isberg, vice president of government relations at payroll processor American Data Processing Inc.
“Tax deferrals can be a good way to get into trouble,” Isberg said. “They can be helpful in the short term, but in the long term it just kicks the can down the road and can make things more difficult.”
Uniquely challenging
While this filing season has been uniquely challenging for the IRS, the agency has faced a string of difficulties in recent years. Last year, it was largely closed during the first weeks of the filing season because of a government shutdown stemming from funding squabbles in Congress. Two years ago, the IRS website faced technical glitches on deadline day, forcing the agency to give taxpayers another day to file.
One bright spot in this filing season is that most individual taxpayers, who are more likely to receive refunds than owe the IRS, have already submitted their paperwork, according to agency data. The IRS had received 142.4 million tax returns as of July 3, down about 2 percent from the same time period last year. The agency anticipates it will receive more than 150 million individual returns this year.
“I was struck by the fact that most taxpayers have their stuff together,” said Gordon Gray, director of fiscal policy at the Washington-based American Action Forum. “Folks had the freedom to delay, and most people filed despite that.”
And those who are owed refunds and haven’t received them yet could be getting a little something extra from the IRS. The agency said last month that it will pay
