The effects of COVID-19 (coronavirus) are widespread. Even those who are healthy are missing work, missing school, and having their lives rearranged. In order to provide relief during this time, especially for those who are unable to work, both state and federal departments of revenue are changing some of their policies, and we wanted to provide you with up-to-the minute updates on tax information as we get them.
IRS Payments Postponed
The IRS recently released Notice 2020-66 to assist taxpayers affected by the current pandemic. This includes postponing tax payments up to $1 million dollars that are due on April 15, 2020. Now, if applicable, you can make payments on or prior to July 15, 2020 without penalties or interest fees. This allows individuals, trusts, estates, corporations, and other non-corporate tax filers to request more time.
Time Extension to File Beyond July 15
The IRS are also allowing individual taxpayers and businesses additional time to file taxes beyond July 15. Form 4868 must be filed by individuals, and Form 7004 by businesses to request an extension to October 15, 2020. It is important to note that taxes owed must be paid by July 15 to avoid interest and penalties.
There have been other extensions of tax deadlines, including quarterly tax payments that are normally due June 15, 2020, which can now be filed by July 15, 2020 without penalties. Furthermore, for 2016 unclaimed tax refunds the deadline has been extended to July 15, 2020.
We want you to know that this postponement is only for payments. You are, as of right now, required to file your return or request an extension by April 15. If you haven’t filed, you may be subject to the penalties and interest that would be postponed otherwise. This notice and postponement of payments is only for federal tax returns. Updates related to North Carolina taxes are outlined below.
IRS Provides Increased Flexibility for Taxpayers
The IRS released that there will be temporary changes to section 125 cafeteria plans, to help provide taxpayers with further tax relief. What does this mean for you? The claims period for flexible spending arrangements (FSAS) and dependent assistance programs has been extended to December, 31, 2020. This allows taxpayers to use unused amounts in these programs. Taxpayers are now able to make mid-year changes to health coverage, health FSAs, as well as dependent care assistance programs due to the COVID-19 pandemic.
North Carolina Department of Revenue (NCDOR) Updates
On March 19, 2020, The NCDOR granted the same relief as the IRS. They will not impose the late payment penalty for income tax for individuals and businesses, that is due on April, 15, 2020, so long as the tax is paid by July 15, 2020. It is important to note that an extension must still be filed. In addition, if you have had tax penalties imposed on you or your business, those penalties may be waived temporarily. As part of Governor Cooper’s Executive Order which places North Carolina under a state of emergency due to COVID-19 (coronavirus), the Secretary of Revenue has elected to waive certain penalties for those that fell within a certain date. In addition, Our accountants in Raleigh are breaking down this penalty relief program to help you better understand if and how you’re affected.
Who is Affected By the Tax Penalty Waivers
The North Carolina Department of Revenue has determined that, due to COVID-19, many taxpayers may have been unable to meet certain filing or payment requirements. In order to aid tax payers, they are waiving penalties for the following reasons:
- Failing to obtain a license (G.S. 105-236 (a)(2))
- Failing to file a return (G.S. 105-236 (a)(3))
- Failing to pay tax when it’s due (G.S. 105-236 (a)(4))
- Information returns needed to report certain business transactions (G.S. 105-236 (a)(5))
This waiver only applies to those who were unable to perform the actions listed above if they occurred between March 15, 2020 and March 31, 2020. Also, actions taken to correct the issue must be complete by April 15, 2020.
Qualifying for the Waiver
In order to qualify for the waiver of penalties, as we mentioned above, the taxpayer must complete the action necessary to correct the issue of noncompliance. This means they must:
- Pay owed taxes
- Obtain the necessary license
- File the return
- Receive an extension
These actions must be completed on or before April 15, 2020 in order to receive the waiver for special circumstances. It’s important to note that The North Carolina Department of Revenue is waiving interest if taxes are paid before July 15.
Obtaining a Penalty Waiver
If you are unable to meet the filing or payment requirements due to circumstances caused by coronavirus (illness, being laid off, or similar reasons) it’s important to complete Form NC-5500. This is the Request to Waive Penalties form, available on the Department of Revenue’s website. Upon filling it out, write “COVID-19” at the top of the form and mail it into the North Carolina Department of Revenue.
Contact Our Accountants in Raleigh for Tax Assistance
During the confusion and chaos that’s happening right now, we know it’s easy to feel overwhelmed. If you’re struggling with preparing your business taxes, or need to consult with an experienced accountant, we can help. Schedule a consultation with our accounting firm in Raleigh by calling (919) 493-2603 or filling out our contact form below to get started.