While the IRS has posted guidance on the postponement of tax-filing and payment deadlines, there are still many more questions to be answered and concerns to be addressed for American taxpayers during the coronavirus pandemic. That’s why the AICPA is calling for additional and “extensive” relief to be offered to those attempting to navigate an unprecedented economic disruption, not only to tax season but also to everyday life. To talk about AICPA’s recommendations, we met with Edward Karl, AICPA’s vice president of taxation.

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By: Bill Hayes, Pennsylvania CPA Journal Managing Editor

Podcast Transcript

While the Internal Revenue Service recently posted some guidance on the postponement of tax-filing and payment deadlines, there are still so many questions to be answered by both the IRS and the Treasury Department in the area of expected tax protocols due to the coronavirus epidemic. Accordingly, the American Institute of CPAs has called for more extensive relief to be offered to American taxpayers as they look to navigate this unprecedented disruption to everyday life. To talk about what more needs to be done today, we are with Edward Karl, CPA, CGMA, vice president of taxation for the AICPA.

Before we get into the more specific tax relief that is needed, can you summarize the efforts of the IRS and Treasury thus far to give relief to American taxpayers?

[Karl] Starting around the 10th, 11th of March, Treasurer Secretary Mnuchin started alluding to some kind of relief for tax season during a press briefing with the President. A couple days later on March 13th, the President held another press briefing, which he declared an emergency situation under the Robert T. Stafford Act for the country relating to coronavirus. And it's under that Stafford Act that gives the IRS the authority to engage in activities that they normally wouldn't.

So for example, the Internal Revenue Code sets the timeframes for which taxpayers have to file tax returns. That's under the law; the IRS cannot change that. However, in emergency or disaster situations, and we see this all the time, usually with a natural disaster. The latest one was with the tornadoes in Nashville where there was an emergency declaration made under the Robert T. Stafford Act, which gave the IRS the authority to extend the tax returns and payments, and they did that liberally for taxpayers who were in the counties in Tennessee who were affected by the tornadoes there.

So, based on the Robert T. Stafford Act being engaged, the IRS on March 18th issued a notice. The notice was a 2020-17, and in that notice the IRS deferred the payment of certain taxes that were connected to April 15th. Those are mainly, they called it in the note, income taxes. So, for April 15th, that would be individual income taxes, and it would be corporate taxes as well, would be deferred to July 15th. They followed up with that several days later based on a lot of pushback by AICPA.

Also, there was a bill introduced by Senator John Thune from South Dakota, whose bill legislatively postponed the filing of returns until July 15th. Again that notice 2020-17 postponed payments, but not filings. That was a big, big problem considering the coronavirus situation. So, then they did follow-up with a notice, a second notice on the 20th of March, 2020-18, which in addition to payments allowed deferral of the filing of returns until July 15^th, and then on the 24th of March they issued Q&As, question and answers, trying to give a little bit more guidance to that notice.

So, when we talk about more extensive relief being needed, what additional actions need to be taken by the IRS and the Treasury Department in your view?

[Karl] Again, yes, in our view, and I mentioned the previous disaster declarations, I’ve been doing this for a long time and one of the constants that I've seen for years and years is that there's some kind of a disaster across the country throughout the year, every year. There are floods, hurricanes, snowstorms, mudslides, tornadoes, you name it. It impacts part of the country. It's very rare though to impact the entire country. They've offered generous relief for all types of taxes. So not just income taxes, but excise taxes, payroll taxes.

Then not just for returns that are due on a particular date, in this case they've picked April 15th, which was important, but not the only issue. So, we're calling for broader relief because I have spoken to a lot of CPAs from around the country and the pain in their voices, the anxiety, the concern that they have for fulfilling their duties while dealing with the unprecedented situation in our country is really a challenge for them and for taxpayers. It is not safe for them to do this work where there are growing shut-ins, lockdowns in states across the country. So, we're calling for relief for a particular period. We're calling for relief from March 3rd until July 15th.

That means any return due in that period, any tax needing to be paid, needs some kind of relief. I can give you a couple of examples. May 15th, which is not covered under the IRS notice, is the main due date for exempt organization returns. That's the form 990. All of the exempt organizations in this country, many of them whose returns are prepared by CPAs and other professionals, will be a challenge to prepare.

Likewise, there are employee benefit plan reports for calendar year employee benefit plans, and there are a number of calendar years for August and September. The due dates for those returns will be March 31st, coming up in a couple of days, and April 30th. Right smack in the middle of when we're in a national emergency as called by the President. So, we think it's appropriate to broaden the relief.

Developments in this area, they're obviously moving so fast. Do you have any hopes or perhaps word from IRS and Treasury on when they might act on or consider some of these recommendations, or is it too early in the process?

[Karl] Word, not yet. Hope, yes. I've seen over the years in all of these disaster and emergency situations, the IRS has acted fairly generously and compassionately. So I do have hope that they'll provide additional relief. I can tell you that I started in these conversations around the 1st of March. Today is a completely different world, unfortunately, a completely different world than we were facing in the U.S. on March 1st. We were trying to look ahead strategically as we saw what was going on around the world and then looking toward, frankly, March 16th, which was the first deadline for partnerships and S corporations. Then to April 15^th, which is the deadline for corporations and individuals, the big deadline.

We were anticipating that there would be a problem. So we started the conversation with Treasury and the IRS back then. Also, I can tell you that CPAs started reaching out to me at the beginning of the month, and it just kept growing and growing. As I mentioned, the anxiety, that anxiety kept growing and growing. Then with schools shut down and CPAs forced to work out of their homes with kids under foot, it just was not a tenable situation. So I do have hope, but I don't have word yet.

Not that it's at all the greatest concern when it comes to this coronavirus pandemic, but with these developments taking place around the tax deadline, can you recall a more challenging or hectic tax deadline? And, this being said, how important is it, and you've mentioned it a little bit already, but how important is it for this additional relief to take place simply for the health of the country, whether you're talking about figurative or literal, really?

[Karl] The number one thing on everyone's mind is physical health. And I don't want to put it at that level. But we're getting into a situation where it is not possible for CPAs to help their clients file. One of the issues for the Treasury Department and making their decision initially to provide relief for payment, but not filings, is that they were concerned about economic health of the country. And a lot of taxpayers, the vast majority of taxpayers, get refunds on their returns. That refund is about an average of $3,000. If you multiply the $3,000 by the millions of returns that still need to be filed, it's a lot of money to get back into the economy. That was one of the motivations for Treasury. Frankly, we support that idea. We would like to see CPAs filing refund returns to do that.

The issue is whether it's possible and safe to do so. That's the real issue. That's why we keep pushing for more relief. I mentioned, the lockdowns, the shelter in place, kids not in school and at home while their parents are working, or trying to work. Elderly taxpayers who can't get information to their CPAs. Even if you file returns electronically, and the vast majority of returns are, it requires a manual signature, something that we've been trying to have the government look into for a number of years to allow a broader ability, to allow electronic signatures in addition to electronic filing. Frankly, one of the concerns of government about the electronic signatures has been identity theft, which is a big problem. So, there are all sorts of health and other types of barriers to being able to file these returns. The question is, what does government expect of taxpayers and their advisors when they can't do it in a safe way?

If it helps drive home your point any there, my shift with the home-schooling starts at 12:30. So, that's something that I'll be looking forward to here.

[Karl] Yes, I have one son with six children, so I'm hearing the stories loud and clear.

I just want to end with that note again, that we do want people to file if it's safe and possible for them to do so, and get their returns, get their refunds, try to help the economy. We support the Treasury Department 100% with that. But we ultimately just want to make sure that everybody stays healthy and safe.