IRS Must Implement Measures in Support of Small Businesses Through Coronavirus Pandemic

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Since our last post on the Covid-19 emergency, much has happened. Today, first-time guest blogger Noah McGraw, J.D., E.A. reviews IRS options in light of the national emergency and argues for the extension of deadlines. I expect the IRS’s coronavirus response webpage to be updated shortly as the agency finalizes its response. In other news, the U.S. Tax Court has canceled its April trial sessions, and other courts are closing as well.

Unfortunately, tax issues associated with natural disasters will be important in the coming months. The ABA Tax Section has collected several resources here, including webinars and free access to the disaster chapter of Effectively Representing Your Client Before the IRS. We will highlight resources and ways our readers can help as events develop. Christine

As President Trump declares a National Emergency for the COVID-19 outbreak, this pandemic affects not only public health, but the health of the very engine of our economy, small business. We are beginning to see historic impacts from the Coronavirus on our country, and it would be in the best interest of the government and citizens to lessen economic damage by providing small business and self-employed taxpayers with much needed relief.

As of this morning the dedicated webpage, irs.gov/coronavirus, merely relays the Coronavirus will be covered by high-deductible health care plans. This will not suffice.

IRS protocol during any natural disaster should be used to allow taxpayers relief. IRM 25.16.1 provides thorough directives already in place with the Service that could be utilized for this crisis. The Service also recently declared that the citizens of Nashville would receive a reprieve after their recent tornado damage.

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While the Coronavirus pandemic may not bring physical destruction, as natural or other declared disasters, which have previously caused these rules to be invoked, the economic impact from the coronavirus will be a lasting effect felt for many months, if not years. The virus is already impacting small businesses across all industries, who have seen a reduction of revenue in only a few weeks’ time due to customer caution, fear, self- or government-imposed quarantine.

The retail, restaurant, hospitality, travel, and entertainment industries are among the hardest hit by the pandemic. These labor-intensive sectors require employment of individuals to perform work, and therefore their Form 941 payroll tax burdens may lead to layoffs. Further, once massive 941 penalties are assessed for failure to timely deposit, they often place small businesses in a financial tailspin.

Per IRM 25.16.1.1 3(a), “The objectives of the Disaster Program Office are to: a. ensure eligible taxpayers receive the appropriate level of federal tax relief when they are impacted by a federally declared disaster,” and “c. timely and effectively communicate IRS disaster relief decisions to external and internal customers.”

In consideration of the level of escalation experienced over the past week, now is the time for the Service to follow the guideline and provide taxpayers with relief on this latest disaster affecting the country.

The Service should invoke IRC Section 7508A (“Authority to postpone certain deadlines by reason of Presidentially declared disaster or terroristic or military actions”) for tax returns and liabilities at least until such time that the Coronavirus could be considered by relevant health experts to be “past the peak” of the outbreak. An additional 90 days beyond this peak would be even more helpful to those businesses who are facing extreme drops in demand for their services as individuals self-quarantine across the country.

This relief necessarily should include extending the filing date for individual and business income tax returns, the Quarterly filing date for businesses’ payroll returns, as well as the non-assessment of penalty and interest against taxpayers who are unable to meet the Federal Tax Deposit payment deadline, or the Estimated Tax payment deadlines.

Our focus as a country needs to be on the health and wellness of our immediate families and communities. If the Service does not establish a scheme of relief from penalties and interest, the economic impact to small business and employees will only be compounded. At this critical time, taxpayers do not need the additional stress of tax season and potentially racking up severe penalties and interest for not having the capacity to dedicate toward tax filings and timely payments during this historic and difficult time.

Comments

  1. Bob Kamman says

    Thanks for reminding IRS of what its own Manual instructs it to do in a crisis. A cynic might wonder if a blanket extension was delayed until after corporation returns, or at least corporate extensions with payments, were due yesterday.

    There is an H&R Block office in the strip mall across the street from my home. At the entrance to the parking lot, it has a temporary sign, “Walk-Ins Welcome.” Walk-ins are definitely not welcome at my office, and some in my family are urging me to lock the doors and work only on returns with documents and data that have been mailed or pushed through the slot.

    Some people, though, need their refunds now more than ever. That’s why they will try to get their returns prepared, even if not in the best of health. Could IRS allow a quick refund, limited to no more than the 2018 amount, on a form similar to the 3-line 4868 extension application? 1) Estimate your 2019 tax. 2) Estimate your 2019 withholding and other payments. 3) We will send you a check for the difference; file your return by October 15.

  2. According to Business Insider, The IRS has extended the deadline to pay (but not to file) by 90 days after April 15th. https://www.businessinsider.com/personal-finance/irs-to-extend-tax-filing-deadline-why-file-taxes-now-2020-3

  3. Deborah: This is the problem with tax law by tweet, and announcement. Mnuchin is quoted as saying: We encourage those Americans who can file their taxes to continue to file their taxes on April 15,” Mnuchin said. “Because for many Americans, you will get tax refunds.

    I took this to mean that the filing deadline had been extended as well, but maybe Business Insider’s interpretation is correct.

    • Randall KC Kau says

      Will one of you be commenting on the issues raised by Notice 2020-17? The authority for the notice is Section
      7508A(a) of the Internal Revenue Code. The Notice does not address refunds, but Section 7508A(a) includes a cross
      reference to Section 7508(b)(2) which in turn overrides certain provisions of Section 6611 governing refunds.

      Randall KC Kau

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