Federal Government Providing Tax Relief in Light of COVID-19, Will New Jersey Follow?

Federal Government Providing Tax Relief in Light of COVID-19, Will New Jersey Follow?

The list of events postponed due to Coronavirus (COVID-19) now includes Tax Day. Given the number of businesses and individuals impacted by the pandemic, the federal income tax delay comes as welcome news.

On March 20, the Internal Revenue Service (IRS) announced that tax returns due April 15 will not have to be filed until July 15 this year. In addition, the upcoming April 15 deadline for making tax payments will also be postponed to July 15, 2020.

In New Jersey, the Legislature has passed a bill extending the state filing deadline for income tax or corporation business tax returns; however, Gov. Phil Murphy has not yet signed it. Lawmakers are also calling Gov. Murphy and Treasurer Elizabeth Muoio to postpone the filing deadline for all state tax returns until July 15 in accordance with the federal tax deadline extension.

Federal COVID-19 Tax Relief

On March 20, the IRS issued Notice 2020-18, which provide guidance on the federal tax delay. The Notice states that any “individual, a trust, estate, partnership, association, company or corporation” with a federal income tax return or income tax payment due on April 15 receives an automatic postponement of that deadline until July 15. Notably, taxpayers do not have to file Form 4868, “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return,” or Form 7004, “Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns.”

There is no limitation on the amount of the payment that may be postponed. In a prior notice, the IRS had stated that C corporations and consolidated groups could postpone up to $10 million in tax payments under the COVID-19 tax relief, while all other taxpayers could delay up to $1 million in tax payments. As set forth in Notice 2020-18, no interest, penalty, or addition to tax for failure to file a federal income tax return or to pay federal income taxes will accrue between April 15, 2020, and July 15, 2020, for any return or payment postponed.

The federal tax delay only applies to federal income tax returns and payments (including self-employment tax payments) due April 15, 2020, for 2019 tax years and estimated income tax payments due April 15, 2020, for 2020 tax years. The Notice expressly states that it does not apply to any other type of federal tax or to any federal information returns. 

New Jersey COVID-19 Tax Relief

The New Jersey Legislature has passed legislation extending the New Jersey business tax filing deadline to June 30, 2020. The bill now awaits Gov. Phil Murphy’s signature.

The bill (A-3841) automatically extends the time to file a gross income tax or corporation business tax return if the IRS extends the filing or payment due date for federal returns. It also automatically grants an extension for those taxpayers if the federal government grants an extension and would not impose penalties or interest if the taxpayer files a return by the end of the extension. The extended due date would be no later than June 30, 2020.

What’s Next?

The impact of COVID-19 on federal and state tax filings and payments will likely continue to evolve. Please check back for updates.