As I outlined in a recent post, the IRS extended the individual tax date for filing, but not business and estimated tax dates, which are the ones that small business owners and their tax preparers truly need.
You can share this great article from Money Magazine with them, outlining the issues, or just ask them to google “AICPA tax deadline small business” — there are a ton of great articles that explain why the need for them to act is so great.
We in the small business accounting and tax world would immensely appreciate your taking a few moments of your time to help us and our small business clients out — it has been a tax season like no other and we need your assistance to make it to the other side.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
– Same as last year, the new date was announced after the March 15 deadline for filing S-Corp and Partnership tax returns; due to a long list of new guidance and still-awaited guidance, this forced us to do extra work to put approximately 75% of our clients in this category on extension. – The extension does not apply to C-Corps and Co-ops, whose returns are still due on the original date of April 15th. This category represents approximately 15% of our struggling small business clients. – The May 17th extension is only for 2020 tax year filings and, quite problematically, does not apply to first-quarter 2021 estimated taxes due on April 15th, which almost all of our clients are required to pay.
Furthermore, when recently questioned about whether or not there was a way the IRS could help small business owners by coordinating the first-quarter payment with the new deadline, Rettig flatly refused: “no”. Pressed regarding the consequences that not extending this due date would have on small business owners, Rettig said that they had to draw a line somewhere to keep wealthy taxpayers from “gaming the system” (for one month, really?); that small business owners challenged by this could just call the IRS if they have a problem (because that’s been going so well this season?); and tried to point out that the penalties aren’t really that high (so suck it up, and never mind that the state penalties are out of control?).
I cannot begin to express the frustration and disappointment with this decision, and I am not alone.
“The announcement is far too selective in who is receiving relief,” Barry Melancon, AICPA’s president and chief executive, said in a statement. “Failure to include estimated payments nullifies any benefit of a postponement since the tax return work has to be done to calculate estimated payments.”
“While this is welcome news for some taxpayers, there are a number of concerns that this limited extension does not address,” writes Frank Washelesky of ORBA. “The IRS extension does not extend the time for paying first quarter estimated income taxes for the 2021 tax year. It is difficult for taxpayers to determine the amount of the estimated tax required without, at least, a reasonable estimate of their 2020 tax situation. Without an extension of these payments, the filing extension to May 17, 2021 has minimal value for many taxpayers.”
Here’s what the problem is: most small business owners need to pay quarterly estimated taxes to the IRS based on either: 1) 100% of the prior-year’s tax liability; or, 2) 90% of the current-year’s tax liability (which we can’t know yet, so we extrapolate based on the actual profit from the quarter).
Based on a somewhat complex set of rules (which are often different at the state level), small business owners and their tax advisers calculate the actual amount to submit. But they generally need to know both these amounts — which is impossible if their tax return for 2020 hasn’t been filed yet. See why this mismatch in dates is a problem?
And to spice things up even further, not all states are going along with the IRS rules. Taxpayers and their advisers need to check with each agency separately (here’s a good running list at-a-glance). Illinois recently decided to comply with the IRS dates, meaning that the quarterly estimated tax problem exists with our Department of Revenue as well.
“This selective decision by the IRS unfortunately creates more bureaucracy and confusion and is out of sync with real world stresses that taxpayers, tax practitioners and small businesses are dealing with,” said Melancon.
We in the accounting profession would be greatly appreciative if you could contact your Congressional Representatives and Senators and ask them to move ALL tax return and payment due dates, including estimated tax payments and corporate taxes.
I know it’s a pain, but AICPA insists that this type of grassroots work really does have an impact… and if you care about the physical and mental health of your tax preparer, and about the anxiety level and financial well-being of millions of small business owners, you’ll hopefully take a moment to make our request go a bit further.
Thank you!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
UPDATE: On April 9, the IRS issued Notice 2020-23, which expands the deadline extension to many more tax returns and payments. The most important is that second-quarter estimated tax payments are also due July 15th now, rather than the original date of June 15th. More here.
Obviously things have been changing daily in the surreal and crazy world we’re all living in right now. As of March 28, 2020, here are the new deadlines for 2019 income tax returns and 1st & 2nd-Quarter Estimated Tax Payments — for both the IRS and Illinois Department of Revenue.
Both Federal and Illinois income tax returns and payments that were due on April 15 are now due July 15. (This includes both calendar and fiscal-year filers, as well as fiscal-year extended due dates that land on April 15th.)
However, keep in mind that the new stimulus checks will be based on 2018 tax returns if the 2019 return is not filed soon — more on that in this excellent article by Tony Nitti. And of course, if you are due a refund, it is best to get that filed sooner rather than later.
An extension can be filed before July 15 to extend the filing date (but not payment date) until October 15, the usual extension date.
Federal 1Q estimated tax payments are also now due July 15 — BUT Illinois 1Q payments are still due April 15.
New automatic, systemic liens and levies are suspended for now. New delinquent accounts will not be forwarded to debt collection for now.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
