Efforts to flatten the coronavirus curve have led to extremely high unemployment numbers and lowered business revenues across the country. As businesses and individuals are struggling to stay afloat, the Internal Revenue Service (IRS) and most state revenue departments have responded by creating a variety of tax relief and deferral options. Are you worried about your state tax bill? You may be able to get some relief. Here is an overview of some of the most prominent state-tax relief efforts due to the coronavirus.
Modified State Tax Return Due Dates
Amid the coronavirus, the following states have followed the lead of the IRS and pushed the due date for individual tax returns to July 15th, 2020:
- District of Columbia
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- West Virginia
These states have slightly different arrangements:
- Colorado — Individual income tax payments are due July 15th, but the state gave all taxpayers a filing extension until October 15th. In other words, you can wait until October 15th to file, but interest and penalties still start accruing on your tax bill on July 15th.
- Hawaii — Residents of the Aloha State get five extra days compared to most other states. Tax returns and payments are due on July 20th.
- Iowa — Income, franchise, and money and credits taxes are due July 31st, 2020.
- Massachusetts — Individual tax payments are due July 15th, 2020, but you don’t have to file until October 15th, 2020. Corporate excise returns and payments are due July 15th, 2020.
- Mississippi — Originally tax returns and payments were due on May 15th, but now the state has moved them to July 15th, 2020.
- Virginia — Generally, Virginian tax returns are due May 1st, but this year, the state has offered residents a six-month extension on filing. Moreover, the state extended the time to pay for individuals and corporation income tax payments to June 1st, 2020.
Of course, if you live in Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Washington, or Wyoming, you don’t have to worry about paying or filing a state income tax return because these states have no income tax.
Filing and Payment Extensions for State Sales Tax
Many states offered temporary filing and payment extensions on sales tax, but most of this relief expired quickly. As of Friday, June 5th, 2020, only California, Iowa, Maryland, Massachusetts, Michigan, Washington (note in this state, monthly sales tax filers still must file on time), and Washington, D.C. are continuing to offer filing and payment extensions, while also waiving penalties and interest. In North Carolina, you are still expected to file and pay sales tax on time, but the state has waived penalties and is only charging 5% interest on late payments.
Additional Tax and Tax Relief Options by State
While most states have extended due dates, many states have gone a few steps further in their tax relief options, and small businesses, in particular, can benefit from many of the following relief options.
California’s Franchise Tax Board (FTB) has moved the due date for claiming refunds, protesting proposed tax assessments, and appealing denied refunds or tax assessments to July 15th, 2020. On the flip side, the FTB also gets until July 15th to collect state taxes where the statute of limitations was due to expire between March 12th and July 15th, 2020. Additionally, businesses with less than $5 million in taxable annual sales can defer up to $50,000 in sales and use tax. Deferred payments are due in 12 monthly installments, and they don’t incur interest or penalties. Small businesses filing returns for less than $1 million in tax have until July 31st, 2020, to file and pay sales and use tax for the first quarter of the year. Governor Gavin Newsom has asked the FTB to give taxpayers extensions for filing, payments, audits, billing, notices, assessments, and refund claims, and he has requested the FTB to provide relief on penalties and interest. As a result, the state may create more relief options as the virus’s impact continues.
The state extended the due dates for filing and paying income and franchise tax (CIT) as follows:
- Entities with fiscal years ending December 31st, 2020: Returns are due August 3rd, 2020; Payments and extension requests are due June 1st, 2020.
- Entities with fiscal years ending January 31st, 2020: Returns are due August 3rd, 2020; Payments and extension requests are due June 1st, 2020.
- Entities with fiscal years ending February 29th, 2020: Returns are due August 3rd, 2020; Payments and extension requests are due July 1st, 2020.
If you have a refund claim set to expire between April 1st and July 14th, 2020, in Indiana, you now have until July 15th, 2020, to claim your funds. The due dates for corporate tax returns and payments due May 15th, June 15th, or July 15th, 2020, has been extended to August 17th, 2020. Estimated corporate tax payments originally due during April, May, and June, are now due on July 15th, 2020.
Iowa gave small businesses the ability to defer their returns and payments, without facing any penalties or interest for sales tax, withholding tax, or both. To take advantage of the deferral. businesses must submit a request to the Iowa Small Business Relief Tax Deferral program. At the time of writing, the first round of applications has been closed, but businesses can apply for the second round for tax periods from April 1st, 2020, to June 30th, 2020. Businesses that requested deferrals between March 20th and April 30th, 2020, received a 60-day deferral on their tax due date. Businesses that apply during the second round must file their returns on time but can defer their payments for 30 days.
The Kentucky Department of Revenue (DOR) has stopped all enforced collection actions for tax liabilities, and the DOR urges taxpayers to contact the state if they cannot pay taxes due to the coronavirus.
Returns and payments for admissions and amusement tax, sales and use tax, withholding tax, and alcohol, duel, and tobacco excise taxes due in February, March, April, and May are now due on July 15th, 2020.
The Massachusetts Department of Revenue (DOR) is suspending the following collection activities for nonpayment of state taxes:
- Requests to suspend driver’s licenses or vehicle registrations.
- Issuing bank levies and wage garnishments.
- Liens on real or personal property.
- Collection calls, unless a taxpayer requests assistance.
- Referring cases to third-party collection agencies.
Estimated tax payments due April 15th and June 15th, 2020, are now due July 15th, 2020. The state has also offered extended due dates for filing and paying sales and use tax. Businesses that have a cumulative liability less than $150,000 in the 12-month period ending February 29th, 2020, do have to file or pay February, March, or April returns until June 20th, 2020. Businesses with tax liabilities under this threshold won’t face penalties if they file by June 20th, but their balances will accrue interest from the original due date. This relief does not apply to marijuana retailers, marketplace facilitators, or motor vehicle vendors.
Businesses with a business tax liability of $50,000 or less in 2018 and businesses with an interest and dividends tax liability of $10,000 or less in 2018 have until June 15th, 2020, to pay these taxes. Other businesses must make their business tax and interest and dividend payments by April 15th, 2020. If you paid on time, you have an automatic 7-month filing extension.
Taxpayers who owe personal, fiduciary, and corporate income tax between April 16th and July 14th, 2020, will not face a penalty if they pay by July 15th, 2020, but your tax liabilities will incur interest. Additionally, you have until July 25th, 2020, to file and pay withholding tax without penalties, but again, these tax liabilities will face interest.
If you have a tobacco dealer license expiring on February 29th, 2020, or later, the state has extended the expiration date until further notice. Corporations with tax returns due in May have until August 14th, 2020, to file. The amount of tax relief being offered by state and federal governments right now is nearly unprecedented, and many states are providing ta relief to taxpayers on a case-by-case basis. If you owe back taxes, you should act now and take advantage of the relief options. To learn more, contact us today and learn how you can eliminate old tax liabilities and get back into good standing with the IRS or state revenue agencies.