President Trump has declared a national emergency under the Stafford Act in response to the COVID-19 pandemic which will “unleash the full power of the federal government”. What does it mean for taxpayers facing March 16 and April 15 filing deadlines?
Though the President has requested Treasury Secretary Mnuchin provide tax deadline relief under §7508A, there has been no official announcement from the IRS that filing season will be extended. Also in question is whether §7508A is appropriate for use when at this moment no federal disaster declaration has been made by the President. However, Trump's letter did acknowledge it may be appropriate for states to request disaster declaration, in which case the mentioned code section would apply.
The IRS has other options for extending filing season, but IRC §7508A is more broad and allows the IRS to extend deadlines up to one year.
Steps the IRS may take include:
- Extending tax return filing deadlines
- Extending tax payment deadlines
- Waiving penalty and interest charges normally applied to late filing and payment
- Providing free copies of tax return transcripts taxpayers may need to file insurance claims
- Expediting amended tax returns claiming a casualty loss and refund resulting from the disaster
If §7508A applies, it appears there may be at least a 60-day extension of time to file and pay for “qualified taxpayers,” but there is uncertainty as to when the 60-day period begins and ends and if it applies. The term “qualified taxpayer” uses the federally declared disaster location for defining who is eligible; while it would appear relief would apply to all U.S. taxpayers in a national emergency, we cannot be sure what the scope of any relief will be until the IRS makes an announcement. Until that time, taxpayers should continue the process of preparing, filing and submitting tax returns and extensions.
We expect states to follow suit, but that is a state-by-state issue. The AICPA is keeping an up-to-date listing of state filing guidance in response to the coronavirus here.