Client Alert: Extended Tax Deadlines – Details Matter

Date: March 18, 2020
We have received inquiries about the possible extension of tax payment and tax filing deadlines in response to Covid-19, as well as some misstated rumors. This client alert is intended to clarify the current state of tax payment and filing deadlines at the federal level and at the Maryland level. As of the moment of this publication (matters regarding this are rapidly changing), only California, Maryland, South Carolina and Washington have announced changes to their payment and filing deadlines.

Federal: Extended time for payment for certain taxpayers, but no change to filing deadlines.

During Treasury Secretary Steven Mnuchin’s remarks on March 17, 2020, he announced the current policy:
If you owe a payment to the IRS, you can defer up to a million dollars as an individual.  And the reason why we’re doing a million dollars is that covers lots of pass-throughs and small businesses, and $10 million to corporations, interest-free and penalty-free for 90 days.  All you have to do is file your taxes. You’ll automatically not get charged interest in [sic] penalties.

As they say, the devil is in the details. On March 18, 2020, the IRS released Notice 2020-17, which expands on Secretary Mnuchin’s announcement. Notice 2020-17 specifies that the time for filing returns is not being extended. Therefore, federal returns for individuals should be filed, or extended, by the ordinary April 15 deadline. However, income tax payments of up to $1 million can be deferred for individual taxpayers for 90 days without incurring interest and penalties. The Notice also clarifies that the $1 million deferral amount applies regardless of filing status, meaning that a single individual and married taxpayers filing a joint return are able to defer up to $1 million.

Individuals can use Free File from the IRS to request an automatic tax-filing extension, but you must estimate your tax liability and pay any amount due.

Maryland: Extended time for filing and paying certain business returns; however, individual and corporate income tax returns follow federal action

On March 11, 2020, Comptroller Peter Franchot announced that the time for filing sales and use tax, withholding tax, admissions and amusement tax, alcohol, tobacco and motor fuel excise taxes, tire recycling fee and bay restoration fee returns originally due during the months of March, April and May have been automatically extended to June 1. So long as payment is made on or before June 1, interest and penalties will be waived.

In that same announcement, Comptroller Franchot announced that Maryland income tax return filing dates would follow IRS action. Therefore, individual and corporate income tax returns currently are/were due by the usual April 15 (individual) and March 16 (corporate) due date, unless an extension is/was filed.

On March 18, 2020, Comptroller Franchot announced that the time for payment of individual and corporate Maryland income taxes would be extended to July 15, 2020, without penalties or interest, in line with Secretary Mnuchin’s March 17 announcement and the IRS’s March 18 notice.

As at the federal level, it is unclear how individual filing status will impact this payment deferral, if at all. Maryland does not appear to have imposed a monetary limitation on the amount of taxes that can be deferred.

Individuals can use iFile from the Maryland Comptroller to request an automatic tax-filing extension, but you must estimate your tax liability and pay any amount due.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.