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Federal and State Officials Provide Tax Flexibility Because of COVID-19

    Client Alerts
  • March 20, 2020

On March 20, U.S. Treasury Secretary Steven Mnuchin announced that the April 15 deadline to file income tax returns for businesses and individuals will be extended for three months, until July 15. The White House had previously granted an extension for paying the tax but not for filing the returns. According to the March 20 announcement, no interest or penalties will be due on taxes paid by the extended deadline. The earlier announcement allowed deferral of up to $1 million for individuals and small businesses and up to $10 million for corporations.

The extended deadline applies to federal income taxes only. States are required to act separately, and many have done so, including North and South Carolina.

On March 19, the North Carolina Department of Revenue responded to the federal payment extension (not the filing extension), stating it would not impose late payment penalties on individuals and businesses for income taxes due by April 15 if they were paid by July 15. The release explains that North Carolina is mirroring the federal payment extension to the extent allowed by law, which prohibits the state Department of Revenue from waiving interest.

As of this writing, the N.C. Department of Revenue has not responded to the March 20 announcement regarding the federal filing extension. Under current North Carolina law, a person granted an automatic extension to file a federal income tax return is granted an automatic extension to file the North Carolina income tax return. However, an extension of time for filing a North Carolina income tax return does not extend the time for paying the tax due, and interest will accrue from the original due date of the return to when the tax is paid.

In South Carolina, the Department of Revenue has announced that all tax returns and payments due between April 1 and June 1, 2020 will now be due June 1, 2020. Penalties and interest will not be charged if payment is made by June 1. This includes South Carolina corporate and individual income taxes, sales and use taxes, withholding taxes, and all other taxes administered by the S.C. Department of Revenue. The Department of Revenue is automatically applying this tax relief for all applicable returns and payments, and no action is required by taxpayers.

Other tax provisions are contained in separate relief measures that continue to evolve at both the state and federal level. We will provide updates in this rapidly developing area. For more information, please contact me or your regular Parker Poe contact.

You can find Parker Poe's additional alerts related to COVID-19 here