CARES Act: New Tax Deadlines

Small and medium sized businesses (SMBs) and their employees are bearing the brunt of the economic damage from the Coronavirus. The passage of the CARES Act was in large part designed to protect these businesses during this uncertain time. Relief for SMBs comes through several initiatives designed to increase liquidity, which is the biggest problem facing businesses today. Moving tax filing and payment deadlines is part of the strategy being employed by the government to ease the liquidity dilemma these businesses are facing.

New Income Tax Filing Deadlines – July 15th

The first major relief initiative enacted by the U.S. Department of the Treasury was the extension of both filing and payment deadlines for federal income taxes, originally due April 15th. The new federal income tax deadline is now July 15th, for both Filing and Payment.

This deferment is automatic and taxpayers do not need to file any additional forms or take any additional steps for this relief. Taxpayers may of course file any time before the July 15th deadline and we strongly encourage businesses to do so, especially if they are eligible for a refund. The Service still expects to issue refunds within 21 days and is also strongly encouraging taxpayers to file as soon as possible.

“Even with the filing deadline extended, we urge taxpayers who are owed refunds to file as soon as possible and file electronically…Filing electronically with direct deposit is the quickest way to get refunds. Although we are curtailing some operations during this period, the IRS is continuing with mission-critical operations to support the nation, and that includes accepting tax returns and sending refunds. As a federal agency vital to the overall operations of our country, we ask for your personal support, your understanding – and your patience. I’m incredibly proud of our employees as we navigate through numerous different challenges in this very rapidly changing environment.” –IRS Commissioner Chuck Rettig

Also be aware that other relief provisions of the CARES Act, such as SBA Payment Protection Plan loans, are dependent on tax return information. If you have not yet filed your returns for 2019 and are considering applying for Payment Protection Plan loans, you may want to consider filing early as it may be more advantageous than relying on your 2018 returns, especially if you have hired additional staff in the last year.

Payroll Tax Holiday

The deadline for employers to make payroll tax payments has been drastically extended as well. Applicable employment taxes for the deferral period, which is the time between March 27, 2020 and January 1, 2021, will now not be due until the end of 2021. The new deadlines are as follows:

  1. December 31, 2021, with respect to 50 percent of owed payroll tax
  2. December 31, 2022, with respect to the remaining amounts

There are a couple of caveats to this provision, however. First, for self-employed tax payers, only 50 percent of their contribution will be deferrable.

Second, if a taxpayer has had a loan forgiven under the provisions of the Paycheck Protection Program or forgiven via the United States Treasury Program Management Authority, then the taxpayer would not be eligible to take advantage of the payroll tax deferral.

This last point should come as a warning for businesses to be cautious as they take advantage of the CARES Act. There are many provisions that foreclose relief from other parts of the act and it is critical that every business consult tax experts who can help strategize the best approach.