Tax News & Views Coronavirus and Postmarks Roundup

March 12, 2020

Treasury Considering Filing Extension in Response to Coronavirus - Wesley Elmore, Tax Notes ($). "Mnuchin noted that Congress wouldn’t need to act to allow for an extension, because Treasury has the administrative authority itself."

The article also notes that "Democrats on the House Ways and Means Committee sent the IRS a letter calling for an extension of the April 15 filing deadline, and the same day that 19 Senate Democrats sent a separate letter making the same request."

The nature and extent of any extension are uncertain, and may not be universal, according to Tax Notes (my emphasis):

“We are looking at providing substantial relief to certain taxpayers and small businesses who will be able to get extensions on their taxes,” Treasury Secretary Steven Mnuchin said March 11 at a hearing of the House Appropriations State, Foreign Operations, and Related Programs Subcommittee.

The limitation to "certain" taxpayers could cause, well, uncertainty. 

Related: Mel Schwartz, What tax measures are likely to be part of Washington's Coronavirus response?

High-deductible health plans can cover Coronavirus costs - IRS. "The Internal Revenue Service today advised that high-deductible health plans (HDHPs) can pay for 2019 Novel Coronavirus (COVID-19)-related testing and treatment, without jeopardizing their status. This also means that an individual with an HDHP that covers these costs may continue to contribute to a health savings account (HSA)."

Link: Notice 2020-15.


A History and Analysis of Payroll Tax Holidays - Garrett Watson and Huaqun Li, Tax Foundation. "Payroll tax holidays have a mixed economic record, repeat the problems that plague temporary tax policy more broadly, and may not be the most effective tool for responding to a growing economic downturn."


Tax Court Decides Dueling Postmarks Case - Kristen Parillo, Tax Notes ($). "The envelope bore two postmarks — one from the private postage meter (dated March 5), and the other from the USPS (dated March 6)." 

The USPS postmark is the one that counts, according to the Court:

We follow the guidelines the regulations provide us. In this instance the regulations instruct us that where the envelope containing the petition bears a legible USPS postmark, the postmark must bear a date on or before the last date prescribed for filing for it to be considered timely filed. See sec. 301.7502-1(c)(1)(iii)(A), Proced. & Admin. Regs. Accordingly, even if we were to credit petitioners' assertions that they timely deposited the petition in the mail, the petition is still considered not timely filed because the USPS postmark on the envelope does not bear a date on or before March 5, 2018.

Tax Court Judge Vasquez offers a hint to other taxpayers:

Further, because petitioners mailed the petition using postage printed through a private postage meter with no request that a certified mail receipt be postmarked by a USPS employee, they are not entitled to any relief under section 301.7502-1(c)(2), Proced. & Admin. Regs.

Further, because petitioners mailed the petition using postage printed through a private postage meter with no request that a certified mail receipt be postmarked by a USPS employee, they are not entitled to any relief under section 301.7502-1(c)(2), Proced. & Admin. Regs.

The moral: Don't wait until the deadline, and if you have to file on paper, spring for the Certified Mail postmark.

Free link to case: T.C. Memo. 2020-33


Financials Reveal Hazards of Interest Deduction Limitation Rules - Emily Foster, Tax Notes ($). "Some companies’ financial disclosures warn about risks inherent in the proposed interest deduction regulations and caution that their deferred deductions might not be realized in the future."

The Biden Tax Plan - Greg Mankiw's Blog. "Most noteworthy is the huge increase in taxes on high-income households. The top one percent would see a 40 percent increase in federal taxes (all federal taxes combined). Their average federal tax rate would rise from 29.7 to 41.7 percent."

Council on State Taxation Urges Iowa to Decouple From Federal Tax Base Expansion - Tax Notes $. "Most states, including those that make up 83% of the population of states with corporate income taxes, have already decoupled in whole or 95% from GILTI."

South Florida Business Owner Sentenced to 24 Months in Prison for Not Paying $10.8 Million in Employment Tax Withholdings - U.S. Department of Justice. The taxpayer "...spent over $190,000 on motorcycles, including several Harley-Davidson bikes, purchased classic and sports cars, bought expensive jewelry, and paid for cosmetic surgery."

Well, he still has some of that $10.8 to look forward to after release, right? Perhaps not: "In addition to the term of imprisonment, U.S. District Judge Marcia G. Cooke ordered [Defendant] to serve three years of supervised release and to pay approximately $9,033,318 in restitution to the United States."


Is delaying the April 15 tax deadline a good way to deal with coronavirus? - Kay Bell, Don't Mess With Taxes. "A lot of the ol' blog's Facebook page followers have seen my request there for input, but so far, no takers. When any relevant comments are posted at that social media platform, I'll add them here." 

Speaking only as a blogger and not on behalf of the firm or anyone - as a preparer, extending tax season is like pulling a Band-Aid off slowly: you get the same result, it just hurts longer. But tax policy decisions are more about taxpayers than preparers, and for many taxpayers, extending due dates makes sense. Consider the dilemma of small business or gig economy worker who owes a balance due for 2019, but whose business is drying up due to Coronavirus shutdowns. The April 15 deadline might make the taxpayer choose between paying rent and paying the IRS. Also, the 2017 TCJA changes prevent taxpayers running losses from carrying them back to a profitable year for a refund, and a needed cash infusion. So there is a case for delaying the due date, and for restoring NOL carrybacks. 

Expand Full Article

We're Here to Help

We are here to help
From business growth to compliance and digital optimization, Eide Bailly is here to help you thrive and embrace opportunity.
Speak to our specialists