COVID-19 creates 11 new state tax issues

Shutterstock_55579699This is the most unusual tax season on the books -- April 15 came and went and yet tax season isn’t over. Over the past several weeks, we’ve heard from members about state and local tax filing, payment and administrative issues. We’ve shared 11 recommendations with the state CPA societies and encouraged them to consider these with their state and local tax authorities.

A recap on the past couple of months 

As you know, over the past two months, the AICPA® has been busy advocating on your behalf and working with Congress. We successfully urged Treasury and the IRS to provide immediate filing and payment relief, along with broader relief for all returns. This led to a delay in federal filings and payments until July 15 for returns due from April 1 to July 15. Our teams continue to advocate and monitor the situation, and we will keep you informed as developments arise.

To support members and state CPA societies, we track guidance from the state tax authorities, develop charts on federal and state due dates and identify various example states in our Recommendations for Administrative, Filing and Payment Relief for State and Local Taxes during the Coronavirus Pandemic.  We shared this with state CPA societies to consider at the state and local level.

All 41 states with a personal income tax moved their April 15 filing and payment deadlines later. Forty states (and DC) changed their April 15 filing and payment deadline to July 15 for individual income taxes, along with some other entities. We had a cliff-hanger with New Jersey as the last state to make that change. The governor signed the legislation April 14, extending the April 15 filing and payment deadlines to July 15. Five states (and Puerto Rico) changed their April 15 individual income tax filing and payment deadline to a date other than July 15. They are Iowa (July 31), Hawaii, (July 20), Idaho (June 15), Mississippi (May 15), Virginia (filings May 1, June 1 payments) and Puerto Rico (June 15). 

States continue to issue further guidance, including FAQs and notices of additional relief and extensions. Links and details on the latest information are in our chart on state tax filing guidance on coronavirus.  

Our recommendations

Speaking of additional relief, the unique and unprecedented nature of this crisis makes many deadlines and administrative practices that state and local tax administrators traditionally require unworkable. To help state CPA societies, the AICPA shared the following 11 administrative, filing and payment relief issues for state and local taxpayers relating to the coronavirus pandemic.

Specifically, state CPA societies may want to consider suggesting that, during the pandemic, their state and local tax authorities:

  1. Permit businesses to adhere to work locations for state and local tax purposes during the pandemic and allow businesses the option to use these employees’ work locations for payroll withholding, nexus and apportionment purposes while such telework requirements are in place.
  2. Delay until July 15 all state and local income and franchise filing and payment and estimated tax payment deadlines originally due March 1 through July 15.
  3. Delay until July 15 all state and local sales and use taxes, property taxes, business activity taxes and other tax filing and payment deadlines.
  4. Waive interest and penalties and provide broad reasonable cause relief for late payment and late filing for returns originally due March 1 through July 15 that are filed by July 15 and other delays and late actions as a result of the pandemic.
  5. Permit electronic fund transfers for payments ­with no additional fees.
  6. Permit electronic images (scanned or photographed) of signatures.
  7. Permit electronic filing and email transmission of documents and returns (including allowing an email of a PDF of a return).
  8. Suspend any requirement to send items and returns via certified mail.
  9. Extend the time to file a refund claim for a previous tax year with a statute of limitations that expires from March 1 until 90 days after the end of the governor’s declared state of emergency in the state.
  10. Provide taxpayers with extensions until 90 days after the end of the governor’s declared state of emergency in the state for audit, exams, appeal deadlines, protest matters, refund claims for previous years and stop during the pandemic all enforcement type activity and automated notices as many of these situations require time-sensitive response.
  11. Provide an exemption from the sales and use tax for donated products, including donations of personal protective equipment (PPE) to a charity or governmental entity. 

Lend a hand

If you want to help with these issues, consider contacting your state CPA society to assist. They are working with their state and local tax authorities to address these issues to benefit taxpayers, businesses and governments and will continue advocating over the next few months as taxpayers in the state adapt to the limitations this disruption presents.

Resources available to you

In addition to the resources listed above, you may also be interested in the following to help you with coronavirus tax filing issues during this time:

We hope that everyone stays healthy and continues to work well remotely with clients and state tax authorities while we get through this extended tax season coronavirus pandemic.

Eileen Sherr, CPA, CGMA, M.T., Senior Manager - AICPA Tax Policy & Advocacy, Association of International Certified Professional Accountants