This year’s tax filing deadline is approaching – and as coronavirus cases continue to rise in many states throughout the United States, some experts believe the IRS may consider additional penalty relief in the coming months.
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“Anything’s on the table, when the Treasury wants to come through, the Treasury comes through,” Ed Slott, founder of IRAhelp.com, told FOX Business. “If enough people don’t have the money [to pay], the IRS or Congress may have to step in.”
The IRS issued aid in the form of the People’s First Initiative in March, which suspended certain activities through July 15.
Initially, the administration delayed the tax filing deadline until July 15 for some people and businesses with tax obligations, before it was expanded to include individual filers.
However, additional assistance could be on the way for people and business owners that continue to suffer financial hardship because of the pandemic, although it may be conditional upon the trajectory of the virus and the U.S. economic recovery.
“Normally, economic hardship is not a defense that the IRS recognizes to tax penalties,” Ian Comisky, Partner at Fox Rothschild, told FOX Business. “If the COVID-19 pandemic does not ease, additional penalty relief might well be provided for businesses and individuals. If the pandemic does ease, with the current budget deficit, additional penalty relief would probably become unlikely.”
Howard Dvorkin, CPA and Chairman of Debt.com, told FOX Business that in particular, he could see the IRS providing relief for underpayment.
That’s because individuals who need to make estimated payments to the IRS – including sole proprietors, S corporations and partners who expect to owe at least $1,000 in taxes – typically base pre-payments on 110 percent of the tax of the prior year return or 90 percent of tax for the current year.
The problem, however, is that business owners may have no idea how much money they will make this year due to shutdowns and coronavirus-related state restrictions, Dvorkin noted. Additionally, they may earn significantly less money than last year, which would mean paying 110 percent of last year’s taxes would be too high (and perhaps fiscally unfeasible).
“It seems with the economy so uncertain that it would be somewhat punitive to hit people with that underpayment penalty when things are so up in the air,” Dvorkin said, adding that the uncertainty is no fault of these individuals.
When asked by FOX Business about the potential for additional relief, a spokesperson referred to the People’s First Initiative – but did not comment on future plans.