Lawmakers welcome Treasury move to extend tax deadlines

Lawmakers welcome Treasury move to extend tax deadlines
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Treasury Secretary Steven MnuchinSteven Terner MnuchinOn The Money: McConnell says it's time to restart coronavirus talks | New report finds majority of Americans support merger moratorium | Corporate bankruptcies on pace for 10-year high McConnell: Time to restart coronavirus talks Lawmakers of color urge Democratic leadership to protect underserved communities in coronavirus talks MORE on Tuesday provided more information about the administration’s plan to extend tax deadlines due to the coronavirus, a development welcomed by lawmakers on both sides of the aisle.

Mnuchin said during a press conference at the White House that individuals who owe the IRS money will be able to defer up to $1 million in payments for 90 days without interest or penalties, while corporations will be able to defer up to $10 million. 

Lawmakers and other stakeholders spoke favorably about the move, saying that extensions will be beneficial for individuals and small businesses that are seeing a loss of income due to the pandemic.

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Still, Mnuchin’s comments leave some unanswered questions, and lawmakers and tax experts are eagerly awaiting formal guidance from the Treasury Department and IRS.

“I think the secretary’s statement is encouraging,” said Nicole Kaeding, a vice president at the right-leaning National Taxpayers Union Foundation. “I think this is a good step to handling the economic crisis that we’re in.”

The coronavirus pandemic has resulted in many businesses closing or scaling back their operations, and has led to workers facing reduced hours and layoffs. 

The Trump administration has been interested in delaying tax deadlines in order to help individuals and businesses that find themselves with limited funds.

The president said in a March 11 oval office address that he would be “instructing the Treasury Department to defer tax payments, without interest or penalties, for certain individuals and businesses negatively impacted.”

Mnuchin on Tuesday provided new specifics about the length of extensions and the dollar amount of payments that can be extended. He argued that such extensions could inject $300 billion of liquidity into the economy.

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“That’s ... an enormous amount of liquidity in the system," he said.

Mnuchin also encouraged people who are able to file their tax returns by the April 15 deadline to still do so, since most people receive tax refunds.

“We don't want you to lose out on those tax refunds,” he said.

About 68 million individual tax returns have been filed through March 6, out of more than 150 million that are expected to be filed this year. Typically, about 70 percent of tax returns filed by individuals claim refunds. Taxpayers that owe money to the IRS typically file toward the end of the filing season.

Prior to Tuesday’s announcement, lawmakers on both sides of the aisle had sent letters to Treasury and the IRS in recent days to urge agencies to provide more flexibility and relief for taxpayers.

Lawmakers were positive about Mnuchin’s comments.

“This is a commonsense step to afford individual Americans and businesses access to financial resources they need during this time of economic and social disruption,” Senate Finance Committee Chairman Chuck GrassleyCharles (Chuck) Ernest GrassleyOn The Money: McConnell says it's time to restart coronavirus talks | New report finds majority of Americans support merger moratorium | Corporate bankruptcies on pace for 10-year high McConnell: Time to restart coronavirus talks GOP Finance chairman raises concerns about Trump push to make payroll-tax deferral permanent MORE (R-Iowa) said in a statement. “This will allow individual filers, small businesses and corporations more financial flexibility in the months ahead as the country faces continued fallout from the coronavirus.”

Sen. Ron WydenRonald (Ron) Lee WydenOVERNIGHT ENERGY: Watchdog report raises new questions for top Interior lawyer | Senate Democrats ask Trump to withdraw controversial public lands nominee | Border wall water use threatens endangered species, environmentalists say Watchdog report raises new questions for top Interior lawyer Trump signs executive orders after coronavirus relief talks falter MORE (D-Ore.), the top Democrat on the Finance Committee, also said he backed Mnuchin’s move.

“Postponing tax payments is a commonsense step to keep money in folks’ pockets and ease cash flow problems for companies,” he said.

Rep. Kevin BradyKevin Patrick BradyOn The Money: Five takeaways from the July jobs report Stimulus checks debate now focuses on size, eligibility Pelosi huddles with chairmen on surprise billing but deal elusive MORE (R-Texas), the top Republican on the House Ways and Means Committee, said that “this tax relief will help ensure that families and small businesses have the cash they need as we work to fight this global pandemic.”

But there are still some areas where lawmakers and tax experts would like to see more clarity and guidance.

Stakeholders said that it’s important for the deadline to file tax returns to be extended, in addition to the extension of the deadline for tax payments that Mnuchin announced.

Steve Taylor, a senior vice president at United Way Worldwide, said that low-income taxpayers need an extension of the filing deadline in order to ensure their returns are prepared correctly. Many free tax-preparation sites for underserved populations in the volunteer income tax assistance (VITA) program — a partnership between the IRS and nonprofits — are currently shut down because of the coronavirus, he said.

“A deferral of tax payment doesn’t help those [low-income] people,” Taylor said. “They need help with tax filing.”

A spokesperson for House Ways and Means Committee Democrats said that Mnuchin’s comments are “welcome relief” but that there is “more we’d like to know though, including how the IRS will address challenges for low-income and elderly taxpayers who don’t have access to crucial free tax preparation services like VITA and [tax counseling for the elderly] due to coronavirus.”

Tax experts also have other questions about how the deferral will work, such as whether it will apply just to 2019 taxes or whether it also applies to quarterly estimated tax payments for 2020. Preparers said that it’s important for Treasury and the IRS to issue formal guidance that they can rely on when advising their clients.

“Tax professionals need guidance in order to take a position on a return,” said Robert Kerr, executive vice president of the National Association for Enrolled Agents. “While this is a fluid circumstance, we still have need for some written guidance.”