The IRS says individuals and businesses can delay filing and paying federal tax bills for 90 days, to July 15 from April 15, as part of an emergency relief plan amid the coronavirus pandemic. Here's a breakdown of the delay and its potential impact on your taxes and the economy.
Do I still need to file?
Yes. Initially, only the payment due date was delayed past the traditional April 15 deadline. The Treasury later announced that it would also grant a 90-day extension for filing federal taxes as well. That means. Taxpayers who are facing difficulty filing by the new deadline still have the option to request an extension.
Who gets to wait?
The IRS said the deferment applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax.
Will I be penalized for waiting?
No. During this unprecedented delay, taxpayers will not be subject to interest or penalty payments, regardless of how much they owe, the IRS says.
What if I am expecting a refund?
If you are expecting a refund, file as usual. The IRS is still processing returns and issuing refunds. Most refunds are issued within 21 days.
Does this apply to states taxes, too?
Not necessarily. Check with your state to see about any changes to due dates. Some are following the federal model, but some are not extending their deadlines. Others are creating exceptions only for certain groups impacted by the virus.
How will this help the economy?
It's unclear. Treasury Secretary Steven Mnuchin estimates taxpayers will be able to keep $300 billion rotating through the economy for now. Some tax and economic experts say any extra cash in the hands of Americans is helpful because many will struggle to get by.
However, some say the tax delay will not provide widespread financial relief.
Howard Gleckman, a senior fellow at the nonpartisan Tax Policy Center, said the extension will have limited impact. That is in part because about three-quarters of Americans get refunds in any year and won't benefit from a delayed tax bill.
Those who file early tend to be low- and middle-income individuals who are getting a refund. Higher-income individuals, or those with complex taxes who owe money to the government, tend to file later, Gleckman said.
This move will provide some relief for those higher paid tax filers, but Gleckman warns that most higher income individuals have extra cash, and they tend to save it not spend it. That leaves lower-income individuals, who need it most and are more likely to go out and spend it, without much relief from this move.