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Treasury Considering Filing Extension in Response to Coronavirus

Posted on Mar. 12, 2020

The Treasury Department is considering extending the tax return filing deadline for at least some taxpayers to help mitigate the economic effects of the coronavirus.

“We are looking at providing substantial relief to certain taxpayers and small businesses who will be able to get extensions on their taxes,” Treasury Secretary Steven Mnuchin said March 11 at a hearing of the House Appropriations State, Foreign Operations, and Related Programs Subcommittee.

Mnuchin noted that Congress wouldn’t need to act to allow for an extension, because Treasury has the administrative authority itself.

“We think we can provide over $200 billion of liquidity into the economy by delaying certain tax payments,” Mnuchin said.

Republican leaders in both the House and Senate are on board with pushing back the filing deadline. Senate Finance Committee Chair Chuck Grassley, R-Iowa, told reporters the delay would allow the money that taxpayers aren’t paying in taxes to circulate through the economy to a greater extent.

And House Ways and Means Committee ranking member Kevin Brady, R-Texas, said the delay would give small and medium-size businesses time to assess their cash flow needs as the extent of the virus’s economic impact becomes clearer.

Calls for Delay

Their comments came a day after Democrats on the House Ways and Means Committee sent the IRS a letter calling for an extension of the April 15 filing deadline, and the same day that 19 Senate Democrats sent a separate letter making the same request.

“Given the growing nationwide concerns regarding the potential spread and the resulting economic and public health impact of such an outbreak, we urge you to act quickly and remove one source of stress that individuals face during this crisis,” said the letter, which was led by Senate Finance Committee member Robert Menendez, D-N.J., and Sen. Patty Murray, D-Wash. “The American people should not have to worry about filing IRS forms in the middle of a public health emergency.”

The American Institute of CPAs also got in on the act. In a March 11 statement, the group requested that Treasury extend filing deadlines for individuals and corporations to October 15 while also waiving most late-payment penalties and interest through that date.

“We are hearing from our members that they and their clients are experiencing great uncertainty about this year’s tax filing season. Our recommendations will help give taxpayers, large and small, much needed relief in the midst of this fast-moving emergency situation,” Edward Karl, AICPA’s vice president of taxation, said in the statement. 

Putting Off a Tax Cut

While the Trump administration has called for a payroll tax holiday to help boost the economy in the wake of the coronavirus, congressional Democrats are instead moving forward on nontax relief measures. The House was expected to vote by the end of the week on legislation that hadn’t been introduced at press time but will likely include provisions to allow for paid sick leave and expanded unemployment insurance, among other things.

Mnuchin said he understood that tax measures were unlikely to pass before Congress adjourns for its recess the week of March 16, but that the White House plans to renew its push for that relief later. President Trump is said to prefer a payroll tax holiday through the end of the year.

Grassley also acknowledged that any tax relief measures won’t pass quickly. He said that tax measures will be explored depending on how the economy reacts to the coronavirus, and that they could be as far as three months away.

Grassley avoided commenting on whether he supports a payroll tax cut, saying only, “It’s just on the table.”

In the meantime, Mnuchin said, the administration is looking at providing loan guarantees to specific industries that are most affected by travel restrictions imposed because of the coronavirus, including airlines, hotels, and cruise lines. He emphasized that those guarantees shouldn’t be considered “bailouts.”

Later in the day, Mnuchin, Trump, and other administration officials met with banking industry representatives at the White House to discuss the coronavirus response. Trump was scheduled to deliver a statement on the coronavirus later in the evening.

More Payroll Tax Cut Naysayers

Trump’s proposed payroll tax holiday has drawn criticism from Democrats who say it wouldn’t target relief to those who aren’t able to work because of the coronavirus, and a coalition of 13 organizations has joined the chorus criticizing the proposal.

In a March 11 letter to members of Congress, the coalition — which includes the AFL-CIO, the Center for American Progress, and the Institute on Taxation and Economic Policy — said that “poorly targeted” tax cuts such as a payroll tax holiday shouldn’t be used in response to the coronavirus.

The letter also mentions avoiding corporate tax cuts and the indexing of capital gains, stating that those cuts “lack the biggest bang-for-the-buck and favor those families that have the most resources to weather the crisis.”

Payroll tax cuts specifically “would provide little immediate stimulus to the economy because they would be relatively inefficient and paid out in small increments over time,” the group said, citing research from the Penn Wharton Budget Model estimating that a 2 percentage point payroll tax cut enacted for a full year would give an average of $50 to those in the bottom 20 percent of the population, while those in the next 20 percent would get an average of $410 and those in the top 10 percent would get an average of $3,000.

“Workers laid off and those unable to find employment due to the Covid-19 emergency would of course get nothing at all,” the letter says.

The group, which said it expects to add signatories to the letter in the coming days, recommended that the government instead make cash payments directly to households.

Alexis Gravely contributed to this article.

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