Tax date change
Six states that have implemented measures on handling taxes in response to COVID-19 include Minnesota, Virginia, New Mexico, Utah, New York, and Iowa. Details regarding these measures and the impact of tax deadline extensions on people’s finances have been provided below.
US STATES RESPONSE TO COVID-19
- Income tax deadlines in Minnesota have been extended until 15 July 2020 where tax payers can pay the Minnesota Individual Income Tax for 2019 without any interest or penalty.
- The deadline extension is in line with the IRS deadline for 2019 federal income tax returns and payments, which was extended to 15 July 2020.
- If one is unable to pay the taxes by 15 July 2020, he or she may request for reduction or cancellation of penalties, interest, and additional tax if there is reasonable cause.
- The state is giving a grace period of 30 days for Sales and Use Tax and Lawful Gambling Tax.
- In addition, a 60-day extension has been granted for MinnesotaCare tax returns for companies that request for extensions on their 16 March 2020 returns.
- In Virginia, income tax payments that are due between 1 April 2020 and 1 June 2020 have been extended to 1 June 2020. The taxes include corporate, fiduciary, and individual income taxes.
- There will be no penalties for payments made by 1 June 2020. However, interest will still apply.
- It is noteworthy that filing deadline extensions have not been given. Taxpayers that take advantage of the payment extension will still need to file income tax returns by their respective due dates.
- Residents of New Mexico have been given a 90-day extension to file and pay their personal income taxes for 2019. The move comes in response to the economic hardships people are facing due to the COVID-19 pandemic. Tax payers have been given until 15 July 2020 to meet their obligations.
- Tax payers who pay by 15 July 2020 will not be penalized. However, interest will accrue.
- The 90-day extension is also applicable to corporate income taxes. Furthermore, the state has extended deadlines for employers who are remitting withholding taxes from “25 March, April, May, and June” to 25 July 2020. Nonetheless, interest will still apply.
- The Utah State Tax Commission together with the Speaker of the House, President of the Senate, and Governor has decided to follow the actions by the federal government when it comes to tax filing and payment.
- The deadline for corporate and individual payments and returns for 2019 was extended to 15 July 2020 by the IRS. No interest or penalties will be charged if payments are made by the new deadline.
- Utah's due date for income and corporate tax is subject to change based on any additional deadline extensions that the IRS allows.
- In New York, interest and penalties can be waved for annual and quarterly filers who could not pay on time because of COVID-19.
- It is noteworthy that sales tax returns and payments were due 20 March 2020.
- In addition, the New York State intends to follow what IRS is doing and extend the deadlines for individual income and corporate tax. However, no formal notice has been provided by the New York State Department of Taxation and Finance.
- In Iowa, penalties and interest as a result of delayed payment in property taxes have been temporarily suspended.
- In addition, the deadline for income tax was extended from 30 April 2020 to 31 July 2020.
- The changes are meant to provide financial relief to people who have been affected by COVID-19 in Iowa.
IMPACT OF TAX DEADLINE EXTENTIONS ON PEOPLE'S FINANCES
Pros of Delaying Tax Form Submission
- One of the benefits of delaying tax form submission is that it gives one extra time to finish his or her returns if the tax documents have not arrived. Delayed submission also gives one time to organize his or her deductions.
- Another benefit of tax extensions is that late penalties are avoided. Filing for an extension helps one to avoid the 5% per month penalty.
- Tax extensions also help to preserve tax refunds. When one files for an extension, “the refund statute of limitations is also extended,” which allows tax payers to receive tax refunds even when they have not yet fully submitted their returns.
Cons of Delaying Tax Form Submission
- A tax extension does not give one additional time to fund an IRA. Unless one is self-employed, IRA contributions are due on April.
- A delayed submission does not have any impact on the deadline for switching from joint tax returns to separate married returns. Married tax payers that have filed their returns before the April deadline will still be required to change their tax returns to “married filing separately” status by 15 April.
- A tax extension can confuse the IRS. One might ask for an extension since he or she does not meet the income requirements. However, filing for the extension will result in the IRS expecting a return since additional time was requested.
Pros of Delaying Payment
- Delaying payment gives individuals and businesses time to meet their IRS obligations without any interest or penalties.
- In addition, delaying payment minimizes the cash-flow issues that many businesses face especially during an economic recession.
- In addition, delaying payment allows the tax payer to have access to financial resources especially if they are facing social disruption or economic hardship.
Cons of Delaying Payment
- One of the cons of delaying payment is the late payment penalty. The penalty is 0.5% of the unpaid tax per month but it can increase to as much as 25%.
- Delaying payment can result in a combined penalty per month if the filing has also been late. The penalty can amount to as much as 5% per month .
Likelihood of Scams
- As it stands, there are no scams relating to tax that having been identified in the U.S. during the COVID-19 pandemic.
- A search through media platforms such as New York Times, Forbes, and the IRS website did not reveal any scams.
- Despite this, there still remains a relative likelihood of scams occurring since regions with COVID-19 cases such as the UK have fallen victim. A case in point is a COVID-19 tax refund scam in the UK that tricked users into giving their tax and financial information.