Treasury Should Push Its Tax-Filing Deadline Past July 15th
One part of the executive branch that deserves plaudits for its handling of a fluid and unprecedented situation is the Treasury Department. Since the onset of the coronavirus pandemic and the economic crisis resulting from it, Treasury has generally done well to take appropriate measures to lighten the burden on taxpayers and to consider and implement the feedback of experts in areas where it initially fell short. But Treasury officials should not rest on their laurels just yet — further tax filing delays arestill needed.
Treasury has acted to delay tax filing deadlines a few times already. In mid-March, they postponed the tax payment deadline from the usual April 15 date to July 15. Though its original guidance failed to postpone the tax filing deadline as well, officials eventually bowed to pressure from experts and ensured that both filing and payment were delayed to July 15 as well.
Treasury Department officials have been careful to consider the situation businesses are in as well. They initially delayed the deadline for Quarter 1 estimated tax payments from April 15 to July 15, but did not delay the Quarter 2 deadline of June 15 — meaning that Quarter 2 payments would be due before Quarter 1 payments. Here again, however, Treasury responded to expert advice and moved the Quarter 2 deadline to July 15 as well.
But in the weeks following these prudent actions, it has become more and more clear that the crisis is unlikely to resolve itself before mid-July. As such, Treasury should act yet again to delay tax filing and payments back to October 15.
There are clear trade-offs to delaying tax payments that make it something that should not be taken lightly. Most obvious is the fact that the short-term loss of revenues leads to a need to take on further debt at the federal level, potentially worsening an already alarming fiscal picture.
But what may be inadvisable under normal circumstances can be the right policy move in a crisis. For one thing, interest rates on federal bonds remain low, blunting the impact of revenue delays. There’s also the matter of the context — after all, the relative fiscal impact of delaying tax revenues for a few months pales in comparison to $2 trillion relief bills.
And delaying tax payments and filing gets a lot of bang for the buck. Delayed liability to remit tax revenue functions as a short-term, interest-free loan for individuals and businesses, providing them with badly needed liquidity to stay afloat. This cash cushion can be the difference between businesses and individuals being able to tread water until the economy can get back into gear — or not.
It also makes logistical sense for the Internal Revenue Service (IRS) to consider further delays. Important as it is to allow IRS officials and other tax preparers to work remotely, this creates strain on taxpayers that have to navigate tax filing in an already difficult season. Delaying tax deadlines provides further time for taxpayers and tax officials alike to adapt.
Of course, federal tax deadlines are only a part of the picture. The need for states to balance their budgets in a given year makes it more difficult for them to make significant changes to tax deadline dates. Nevertheless, where possible, and particularly if states receive anywhere near the astronomical amounts of federal aid they are requesting, states should act to further delay tax filing and payment deadlines as well.
It’s encouraging to see that Treasury has generally been cognizant of the need for unique measures regarding tax deadlines in this crisis. Now, department officials should continue to display an understanding of the issues taxpayers are facing by further delaying tax filing and payment deadlines once again.