TAX VIRUS BRIEFING: Filing Deadline Confusion, States Scramble

As the spread of coronavirus continues to upend everyday life, companies, tax and accounting professionals, and firms around the world are seeing shakeups to their ordinary routines and operations. This week confusion loomed over tax filing deadlines, states took action across the country, and banks are concerned that the virus hitting during the start of an accounting change could dry up lending.

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Tax Filing Extensions

Treasury Secretary Steven Mnuchin announced Friday in a tweet that IRS tax filings won’t be due until July 15, though he encourages folks who are expecting a refund to file as soon as they can to get their checks quickly.

The tax filing deadline now matches the payment deadline that was announced earlier in the week and had caused confusion among the tax community.

The American Institute of CPAs applauded Sen. John Thune (R-S.D.) for leading a bipartisan congressional bill (S. 3535) to extend the tax filing deadline to July and thanked all the other Senators for either cosponsoring Thune’s bill or signing a letter to Mnuchin requesting relief.

“We know that having a chorus of voices from Congress urging the Treasury Department to formally extend the deadline until July 15 was instrumental to the final decision made by the Administration,” Edward Karl, AICPA vice president of tax policy and advocacy, said Friday in a statement.

The IRS released guidance Friday on the tax extensions and also permitted unlimited tax payment deferral for individuals and businesses for those extra three months.

State by State

States moved individually all week to close offices and delay deadlines. Many were waiting on the IRS to act before making any final decisions. Once Mnuchin announced a filing delay Friday, New York, Utah, Arizona, and New Mexico became the first states to mirror the federal government in pushing tax filing due dates from April 15 to July 15, in addition to waiving penalties and interest for late tax returns and payments.

Looking to stay up to date on the latest on shifting state tax guidelines, deadlines, and policy? Bloomberg Tax’s daily state virus update tracks developments throughout the day.

Cost Recovery for Businesses

Small and mid-size businesses will be able to recoup some of their virus-related expenses under new guidance released Friday evening from the IRS and the Treasury and Labor departments. Allyson Versprille has more.

IRS Acts on Worker Safety

The IRS is ramping up measures to protect its staff amid the virus pandemic, however some states are beating the agency to the punch.

Bloomberg Tax obtained an internal email Thursday night saying the IRS is reducing staff by 50% at agency facilities involved in “mission-critical operations,” including return processing centers, and more paid leave options. The measures followed criticism from the National Treasury Employees Union that the agency was failing to put in protective measures against the spread of the virus during the middle of tax season.

The onsite staffing reductions described in the email IRS Commissioner Charles Rettig sent to employees affects call centers and submission processing centers in Kansas City, Mo.; Ogden, Utah; Austin, Texas; and Fresno, Calif. The agency, when appropriate, will also place employees on paid weather and safety leave if they aren’t eligible to work remotely.

However, as governors order office closures for businesses that aren’t essential, IRS employees at some facilities are being told to stay home altogether, Allyson Versprille reports.

Also Shuttered: And on Friday the IRS also announced that it is shuttering taxpayer assistance centers that offer free tax assistance to people who can’t resolve their tax issues online or over the phone. As of May 2019, the IRS had more than 300 centers across the U.S., according to the IRS watchdog Treasury Inspector General for Tax Administration.

Low-income Taxpayers: The lack of free in-person help with filing returns has been challenging for millions of low-income taxpayers that rely on that assistance, especially to put together necessary documentation for their earned income tax credit refunds. Other suspended services include AARP Foundation’s Tax-Aide Program. Read more from Lydia O’Neal.

Halting Enforcement: The IRS is also pausing some enforcement actions. Its automated collection system will stop imposing levies and sending most notices, according to an alert sent to employees Tuesday and seen by Bloomberg Tax.

Tax Court Shuts Down

The U.S. Tax Court building closed its doors on Wednesday. Judges will continue to issue opinions, though there may be delays. The Court’s eFiling and eAccess systems will remain operational.

Breaks for Hand Sanitizer

Distillers want Congress to make it easier for them to start producing hand sanitizer by giving them an excise tax waiver that would make it cheaper for them to use undenatured alcohol—which is used for making alcoholic spirits for consumption.

Pandemic Problem for Banks

Bankers are asking to delay or alter the current expected credit losses, also known as CECL, amid the spread of Covid-19. Even before the virus pandemic, they warned that being forced to book losses before they happened could dry up lending in an economic downturn.

“This is everything everyone was worried about,” said Michael Fadil, chief risk officer at Home Diversification Corp. “If this doesn’t open people’s eyes and cause enough problems for people to get worried, then I don’t see what could dismantle it.”

The Conference of State Bank Supervisors on Friday said it supported Federal Deposit Insurance Corp. Chairman Jelena McWilliams’ plea to accounting rulemakers to delay the CECL rules.

Allowing institutions to delay their transition to the CECL methodology “will give banks more time to focus on their customers,” the organization’s CEO John Ryan said in a statement.

Nicola M. White has more.

CPA Tests Postponed

Exams for accountants are yet another area affected by the the global virus outbreak.

The National Association of State Boards of Accountancy said this week that testing centers in the U.S. and Canada would close for 30 days to protect the health of candidates for the certified public accountant license. Tests centers are slated to reopen on April 16 but that date could shift.

NASBA has urged states to allow candidates whose test scheduling windows were set to expire between April and June to have an extended window that would stretch through September. It will be up to individual state Boards of Accountancy, however, to grant that relief.

U.K. Delays Exams: The Institute of Chartered Accountants in England and Wales canceled professional accounting exams in June, and postponed advance levels exams from July to the end of August. The Association of Chartered Certified Accountants still intends to hold its professional exams later this year, but only in places where it’s safe to do so.

KPMG Expands Paid Time Off: KPMG LLP offered additional paid time off options for its U.S. professionals after closing its U.S. offices this week and requiring staff to work from home. Staff can use the new option if they are sick with Covid-19 or if they’re unable to work while KPMG offices remain closed.

“Our hope is that this expanded paid leave policy will provide our people with peace of mind during this stressful period,” KPMG said in a statement Friday.

Global Measures

• Multinationals’ cross-border tax planning could be upended by the coronavirus pandemic.
• The EU is relaxing rules to limit government handouts to businesses.
• Norway reduced its lower value-added tax rate and postponed other tax deadlines.
• Chile suspended corporate income tax payments.
• Canada is deferring tax payments for individuals and businesses.
• France agreed with four EU countries to ease treaty restrictions on cross-border workers.
• Turkey introduced a $15 billion plan to help businesses.

More international news and information on coronavirus is here.

Dive Deeper With Bloomberg Tax Insights

• Dan Morgan of Blank Rome: Planning and operational issues related to 401(k) plans for employers facing furlough and layoffs could creep up.
• Garth Landers of Mimecast: The risk of cyberattacks on law firms is high during a busy tax season amid a virus outbreak.
• Sivakumar Saravan and Sowmya Varadharajan of Crowe Singapore: Multinational companies will need to prepare for serious consequences to their transfer pricing thanks to Covid-19.
• K2’s Joanne Taylor and Thompson Hine’s Patrick Abell: The virus won’t spare financial institutions and commercial property owners either.
• Daniel Messeloff of Tucker Ellis LLP: If you’re a business looking to send employees home to work, here is what you should consider.

—With assistance from Michael Kapoor in London, and Nicola M. White and Amanda Iacone in Washington.