TAX FILING AND PAYMENT EXTENSIONS DUE TO CORONAVIRUS SITUATION IRS & STATE OF MICHIGAN
- General Tax Filing and Payment Date extended from April 15, 2020 to July 15, 2020:
Current Emergency Procedure. Most taxpayers know that the Internal Revenue Service (“IRS”) issued permission, in separate notices during March, 2020, to allow taxpayers filing personal income tax returns, for 2019, and paying the balance of taxes shown on the return, a blanket extension to July 15, 2020 - - for filing and payment. There will be no penalty and interest charged for filing and paying by July 15, 2020. For purposes of filing and paying 2019 taxes by July 15, 2020, it is not necessary to file with the IRS any extension application for a July 15, 2020 filing and payment. [IRS Notices 2020-18 and 2020-20].
Old Procedure May Still be Used. Individual taxpayers may, per the old established procedure, still file for a 6-month automatic extension for filing their 2019 income tax return, until October 15, 2020, on IRS Form 4868. It should be noted that Form 4868 does not provide for an extension to pay. For payment purposes, interest would be assessed, and a possible late payment penalty (to wit; ½ of 1%, per month, for the late payment). The taxpayer does, however, have the ability to ask IRS for a waiver of the late payment penalty if the taxpayer can show IRS “a reasonable cause for not paying on time”.
- Existing Installment Agreements for Tax Payments: Under a separate IRS notice (IR-2020-59), issued March 25, 2020, the IRS provided the following: For taxpayers under an existing installment agreement, payments due between April 1 and July 15, 2020, are suspended. Taxpayers who are currently unable to comply with the terms of an Installment Payment Agreement, including a Direct Debit installment agreement, may suspend payments during this period if they prefer. Further, the IRS will not default any installment agreements during this period. By law, interest will continue to accrue on any unpaid balances.
Questions answered by the IRS as to Direct Debit Installment Agreements (“DDIAs”):
Will direct payments continue to be deducted from the taxpayer’s bank for DDIAs during the suspension period? Yes. The IRS will continue to debit payments from the taxpayer’s bank for DDIAs during the suspension period. However, taxpayers who are unable to comply with terms of their installment agreement may suspend payments during this period. Installment agreements will not default due to missing payments during the suspension period through July 15.
What is the best way to suspend direct payments for a DDIA?
Taxpayers should contact their bank directly to stop payments if they prefer to suspend direct debit payments during the suspension period. Banks are required to comply with customer requests to stop recurring payments within a specified timeframe. The IRS may be able to suspend certain single DDIA payments upon request, but due to disruptions caused by COVID-19 issues, it may be difficult to reach an assisting person. Note that if payments are stopped, in order to avoid possible default of the agreement once the suspension period expires on July 15, 2020, taxpayers must inform their bank to allow the debits to resume at least two weeks before their next payment is due.
- Michigan Tax Matters:
Income Taxes. On April 2, 2020, Governor Gretchen Whitmer signed Executive Order 2020-26, which extends April 15, 2020 deadlines for State of Michigan and Michigan city income tax filings and payments, for 2019, to July 15, 2020. This also applies to April State of Michigan and Michigan city estimated income taxes. Certain April 30 payment dates are extended to July 31, 2020.
Sales, Use, and Withholding Taxes. Due to the disruptions to the normal business cycle, for purposes of sales, use, and withholding tax requirements for taxpayers, who are normally required to file returns and remit tax by the 20th day of each month, due to the Covid-19 outbreak, the Michigan Department of Treasury is waiving penalty and interest for the late payment of tax or the late filing of a return, which were due on March 20, 2020. This relief will continue in effect through April 20, 2020. In its original form, this waiver is limited to sales, use, and withholding payments and returns which were due on March 20, 2020. It cannot be predicted how this will affect later monthly filings, such as those due on April 20, May 20, and following.
Michigan Foreclosures Delayed. On March 18, 2020, Governor Gretchen Whitmer signed an Executive Order that extends the property tax foreclosure deadline under Michigan’s foreclosure statute (section 211.78g(3)), for Michigan residents - - to pay back taxes and avoid foreclosure in their property during the ongoing COVID-19 pandemic. The Executive Order moves the tax foreclosure deadline from March 31, 2020 to May 29, 2020, or 30 days after the state of emergency is terminated, whichever comes first. The Executive Order encourages the State Court Administrative Office to urge judges of the Michigan circuit courts to amend orders of foreclosure issued in 2020.