The Treasury Department issued guidance saying that taxpayers can delay paying some federal income taxes for 90 days but still must submit their forms to the Internal Revenue Service -- or officially request an extension -- by April 15.
Individuals can delay payments of up to $1 million in taxes and corporations can get payments of up to $10 million deferred until July 15 without interest and penalties, according to a notice published Wednesday.
“Americans should file their tax returns by April 15 because many will receive a refund. Those filing will be able to take advantage of their refunds sooner,” Treasury Secretary Steven Mnuchin said in a statement. “This deferment allows those who owe a payment to the IRS to defer the payment until July 15 without interest or penalties.”
The guidance clarifies and expands on Mnuchin’s announcement Tuesday that businesses and individuals can delay some tax payments, which left some taxpayers confused about whether they still must file a return by the April deadline and how the payment extension would affect their specific situations.
“This guidance does not change the April 15 filing deadline,” according to the statement.
The payment extension is part of the Trump administration’s effort to curb the economic effects of the coronavirus pandemic. Mnuchin said the delay will free $300 billion of liquidity in the economy as individuals and businesses have more time to address short-term cash-flow issues if they can delay their tax payments.
Taxpayers who want more time to file their returns can do so by filing a form with the IRS requesting an automatic six-month extension.
Many higher-income people, especially those who own a business or invest in multiple partnerships, apply for the extra time to file because their returns are more complicated. In a typical year, they’d have to submit 90% of their tax liability on April 15 or face interest and penalties on the late payment.
This year, they can pay up to 90 days late before interest and penalties kick in and file up to six months late, if they have requested an extension.
About 15 million people requested extensions last year, according to the IRS. That number could be even higher this year as taxpayers struggle to compile documents and consult with tax preparers while most people are advised to stay home.
Nearly 68 million individuals had already filed their tax returns as of March 6, according to the most recent statistics from the IRS. That’s about 45% of the returns the agency expects to receive this year.