As the coronavirus pandemic continues to spread, stock market prices continue to plunge. Experts agree that the impact on world economies will be significant. In fact, Indonesia and other countries across the globe have already unveiled tax relief packages. President Donald Trump noted possible tax relief during the coronavirus pandemic for Americans, as well.
Is Tax Relief During the Coronavirus Pandemic Really Necessary?
In early January, the World Health Organization (WHO) reported a mysterious pneumonia in China. Less than two weeks later, the first case of it appeared outside of China. Two months later, they marked the 100,000th case. COVID-19 was known as the latest pandemic just a few days later.
Pandemics drastically impact even the strongest of economies. Jamison, et al. explain in Disease Control Priorities: Improving Health and Reducing Poverty. “Negative economic growth shocks are driven directly by labor force reductions caused by sickness and mortality and indirectly by fear-induced behavioral changes. Fear manifests itself through multiple behavioral changes.”
Pandemics effect all walks of life, classes of people, and they certainly effect every industry. Every taxpayer is likely to experience a change in their leisure life, social life, work life, and family life. This mass disruption in normalcy will ripple. It’s already triggered panic buying. Jokes across every social platform primarily refer to the shortage of toilet paper. You may have seen some yourself.
This inevitably leads to difficulty filing and paying taxes. Small business owners, 1099 income-earners, and employees are staring down a tax deadline in just a few weeks. These disruptions in the system make the deadline unreasonable for many taxpayers.
Our society will need a considerable amount of support during this time. Tax relief during the coronavirus pandemic will free up some much-needed money for the working class.
Tax Relief During the Coronavirus Pandemic Starts with Deadline Extensions
On the heels of the WHO pandemic announcement, Trump outlined tax relief strategies to anticipate. “I will be instructing the Treasury Department to defer tax payments, without interest or penalties, for certain individuals and businesses negatively impacted,” Trump stated in a March 11 oval office address.
“Finally,” he later said, “I am calling on Congress to provide Americans with immediate payroll tax relief.” Treasury Secretary Steven Mnuchin followed suit by sharing plans to allow most taxpayers a six-month deadline extension.
That would extend the deadline from April 15 to October 31. Although, at the time of publishing, the Internal Revenue Service (IRS) had not yet stated as such. Click here for the Service’s latest news releases.
Extensions can go a long way in saving taxpayers money. The late-filing penalty starts to accrue one day after the deadline. Then, it accumulates daily.
The late filing penalty is the most expensive penalty that the IRS charges. Filing an extension eliminates the charge for six months. This results in much-needed tax relief during the coronavirus pandemic.
The IRS bases their penalty on the amount of tax you owe on the deadline. That’s five percent of the total you must report. In contrast, the Failure-to-Pay penalty is .5 percent of the tax you owe on the deadline. They will reduce it to .25 percent of the unpaid amount if you set up a payment agreement.
If you file late and owe the IRS, they reduce the late filing penalty by the amount of the late payment penalty.
Payroll Taxes and the Trust Fund Recovery Penalty
Small businesses collect taxes from their employees and put them in a trust fund for safekeeping. Then, as the tax deadline approaches, they send them to the IRS on behalf of their employees.
When a small business is struggling, it can be tempting to borrow money from the fund to make ends meet. Once in a while, the deadline has arrived, and the business hasn’t been able to replenish the trust fund. Tax relief during the coronavirus pandemic can make or break business owners in these scenarios.
Collectively, small businesses owe a significant portion of the nation’s total amount of unpaid taxes. For that reason, small businesses are the IRS’s most common target. In fact, they use fairly aggressive collection tactics to recover payroll taxes.
The trust fund recovery penalty isn’t monetary. The IRS specifies people to take personal responsibility for the business’s payroll taxes. In other words, the IRS assigns the tax debt to company representatives that they feel should’ve paid the taxes.
It can be the company owner or members of its board. It can be employees from a payroll service provider or the company’s accounting manager. The IRS conducts a rigorous investigation before determining who will receive the trust fund recovery penalty.
They examine bank records, employment contracts, and company procedures. They conduct interviews to learn about the internal structure of the company, as well. If the IRS assesses you with a trust fund recovery penalty, payroll tax relief during the coronavirus pandemic will help.
Can I Get Help Now?
Congress and the White House are currently working to agree on a package of relief for Americans. We expect the package to include tax relief that we outlined above. Our hope is that relief for taxpayers is robust and accessible for all.
If you’d like to resolve your tax issue or learn more about what the tax relief portion of the package can offer you, give us a call. Our staff has 35 years of experience and an A+ rating at the Better Business Bureau.
We’re pleased to offer a free, no-obligation consultation about your case. We’ll help you gain an understanding of your options. We can also help you maximize the tax relief that we anticipate in the upcoming support package.
Call us today, and sleep better tonight!