March 26, 2020

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Extensions all around

Last week in my WFH vignette, I wrote this:

To the extent that other accounting firms are still having people come into the office or go to client sites, I sincerely hope they reconsider. Tax deadlines are being pushed back, so relax, people!

Maybe it was the ambiguous plural (or my suggestion to relax when there’s not much to relax about right now), but a number of you responded to clarify that only payment deadlines were being delayed, not filing deadlines. And you were right! For a little while, anyway:

The U.S. extended the April 15 tax-filing deadline to July 15, an unprecedented delay that will give people more time to prepare and pay their taxes as workers lose jobs and businesses close during the coronavirus pandemic.

“All taxpayers and businesses will have this additional time to file and make payments without interest or penalties,” Treasury Secretary Steven Mnuchin said on Twitter.

It took just a few days for the Treasury Department to look at its decision to delay tax payments and think, “Huh. Maybe we shoulda pushed the filing deadlines, too.” Here’s the IRS press release, and here’s Notice 2020-18, if you haven’t seen them yet.

I’d like to think that my years of observing government decisions led me to choose nuanced language that’s correct in different contexts. (Deadlines around the country were being pushed last week, after all.) I also know, thanks to years of writing for an accounting audience, that all the nuance in the world isn’t going to stop some accountants from pointing out that you’re wrong based on their interpretation. But wait, wait. Just like I said last week, I’M NOT MAKING THIS ABOUT ME.

Anyway. This delay of the filing deadline isn’t particularly novel. Millions of people every year get extra time to file their income tax returns by filing for extensions… until October! Sure, they have to submit a form requesting that extra time, but the IRS is perfectly happy to give it to them.

Extensions are great (as if you didn’t already know); they’re an opportunity for taxpayers to get their returns right rather than rush to get them done. Once you’re on extension, the pressure’s off. You can decide to pull everything together and still file your return before Memorial Day—or you can put it off until July 4th! Or Labor Day! It’s glorious.

But in 2020, for the first time ever, everyone is getting a mini extension without filing a form or really getting a say in the matter. Yes, unfortunately, the IRS is giving us reprieve from a stressful situation… to deal with a far more stressful situation. April 15 is going to blow by, and no one is even going to notice since we’ll all still be freaking out because we can’t stop touching our faces and taking our temperature. If we’re lucky, Memorial Day will roll around, and all these people on extension for the first time will realize they still have six weeks before they have to file. Then they’ll get to enjoy it a little bit at least.

Tax code gems

My pal, uber tax nerd, freak athlete, and all-around great guy, Tony Nitti, has a post over at Forbes about Section 139, a gem in the tax code that your small business clients could use right about now. Because many of you are also uber tax nerds, you may already be familiar with Section 139, but in case you’re not, I’ll let Tony give you the gist:

[W]hen employing Section 7508A to delay the April 15th tax deadline in Notice 2020-18, the IRS stated that the President’s emergency declaration constituted a federally declared disaster for purposes of Section 165. Thus, the COVID-19 pandemic satisfies the requirement in Section 139 of a federally declared disaster.

As a result, beginning immediately, employers may provide tax-free payments to employees — while still claiming a full deduction for the payments — provided the payment is to reimburse or pay the employee for “reasonable and necessary personal, family, living, or funeral expenses” incurred as a result of COVID-19.

Important! Section 139 cannot be used for paid sick or family leave, however. (That’s what the Families First Coronavirus Response Act is for.) So businesses can’t go crazy, but every little bit helps, and hopefully this gem that Tony dug up will be helpful for some.

The pandemic defense

“Virus-Panicked Jury Rushed Polygamist Tax Case, Defense Says” is the Bloomberg headline, and boy, that didn’t take long. If there were ever a perfect opportunity to use a public health emergency as an excuse for getting your client’s criminal conviction thrown out, a convoluted tax case would be it:

Businessman Lev Dermen, 53, was found guilty Monday in Salt Lake City, where four members of the Kingston family admitted their role last year in a scheme to cheat U.S. tax authorities of $512 million through a program designed to promote clean fuels.

In a court filing after the trial ended, Dermen attorney Mark Geragos called the verdict a “complete travesty of justice.” He said the jury asked no questions of the judge in less than eight hours of deliberations that began last week. Dermen was convicted after a seven-week trial of all 10 counts including money laundering and conspiracy to commit mail fraud. He faces 20 years in prison each for several of the counts.

I’m not saying that a jury can’t find someone guilty of 10 criminal counts in a complex, biofuel credits/tax fraud/conspiracy/money laundering case in less than eight hours. But when one juror was excused because of pneumonia, another for the flu, and there’s pandemic going around, I can understand why the remaining jurors might want to move things along.

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Caleb Newquist Caleb is Editor-at-Large at Gusto. In 2009, he became the founding editor of Going Concern, the one-of-a-kind voice on the accounting profession, serving in the role for 9 years. Prior to Going Concern, Caleb worked as a CPA for nearly 6 years in New York and Denver. He lives in Denver with his wife, two daughters, and two cats.
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