We are dealing with unprecedented times. The prolific spread of COVID-19 has caught many taxpayers off guard. With mandatory social distancing in place, many small businesses have been forced to temporarily close or alter their business practices. The COVID-19 outbreak had a tremendous impact on many taxpayers. Self-employed workers and small business owners were among some of the hardest hit. In order to combat the economic hardships for small business owners and self-employed taxpayers, the IRS recently issued the IRS Notice 2020-17.
What is IRS Notice 2020-17
In response to the COVID-19, the IRS notice 2020-17 is meant to address tax concerns for small business owners and self-employed taxpayers. April 15th is less than a month away, and the government has decided that the looming deadline is putting an undue financial hardship on small businesses that have closed as a result of the COVID-19.
Some of the hardest-hit businesses included those in the travel and hospitality industry. Occupancy rates are dwindling, and many people don’t know how to proceed. The IRS Notice 2020-17 clarifies the government’s position on the matter. The IRS will delay tax payments until July 15 so taxpayers have extra time to pay their taxes. Tax officials also postponed the deadlines for Q1 and Q2 estimated tax payments until the new filing deadline; July 15.
IRS Notice 2020-17 announced the agency’s first major moves to assist business owners. Here are a few key takeaways:
Please note that these points could change soon. Since releasing IRS Notice 2020-17, the government decided to delay the individual tax deadline to July 17th. More changes could come soon, so stay tuned to Shared Economy Tax for the latest news.
Avoid Interest and Penalties
The deferment of tax payment enables taxpayers to avoid paying interest and penalties.
Deferment of Estimated Taxes
The IRS pushed the April 15th tax deadline to July 17, and they also postponed the tax deadline for first-quarter payments on estimated taxes. These payments cover your tax bill for the year. If you’re self-employed, you need to make payments on a quarterly basis.
Delayed Self-Employed Taxes
If you are self-employed, you probably need to make estimated tax payments. These payments are normally due by April 15th. However, the IRS pushed the deadline back to July 17th this year. The federal government also postponed the deadline for self-employment tax payments.
Corporations Can Defer Up To 10 Million
As a corporation, if you use the tax calendar year for tax purposes, your income tax payment is usually due April 15. Under the IRS Notice 2020-17, this also delays your due date until July 17th.
Trusts and Estates Can Defer As Well
Trusts and estates can also defer up to a combined 1 million, until July 17th.
Federal Tax Deferments Do Not Guarantee State Deferments
Although many states are also deferring state and local tax payments as well. Check with your state board of equalization on the specifics in your state.
How Does IRS Notice 2020-17 Affect Me?
The notice extends the deadline for 2019 tax payments until July 17th. At first, the deadline for individual returns stood pat at April 15, but the government later decided to extend that deadline as well.
If you need an extension, you can file a 4868 for an extension date of October 15. Without filing an extension, you must file your taxes by July 15.
Most of our clients make estimated tax payments for their self-employed income. If you fall into this category, you should know that this deadline is also extended. First-quarter payments are due July 15th. Oddly, second-quarter payments are still due on June 15th right now, but that could change soon.
Read It Now
You can read the full text of the IRS Notice 2020-17 here.
More Information on Tax Deadline Changes
This IRS notice provided some clarity on federal efforts to reduce the impact of COVID-19, but it’s just the beginning of government relief efforts. In the past few days, tax officials also postponed the individual filing deadline. More modifications could come soon. In the meantime, business owners need to stay calm and hunker down.
It’s hard to imagine now, but things will return to normal eventually. You can rest easy knowing the government is doing everything it can to lessen the economic impact of COVID-19. The outbreak is straining many small business owners and independent contractors. If you have questions or concerns, don’t hesitate to reach out to the tax experts at Shared Economy. Click here to talk to a tax expert now. For more tips and updates subscribe to our newsletter below.