The pandemic hit the United States just as most people were preparing their 2019 tax returns for April 15. To make life a little less complicated, the Treasury Department postponed Tax Day from April 15 to July 15.
Now, the July 15 deadline that once seemed so far off is closing in. What should be done now? Should the due date for filing taxes be delayed again? Might those taxpayers who owe money be given a few more months to pay?
Delaying the date for paying owed taxes into 2021 would make it easier for hard-hit workers to make it through 2020. File your tax returns on July 15 and receive your refund for any overpayment made in 2019 — or if you have underpaid for 2019 and owe the IRS money, then that payment should be able to be made in April 2020. No penalties. No interest.
That makes a great deal of sense.
But some have suggested, trying to be helpful, that the Treasury should delay the tax filing deadline to Oct. 15 or other dates. This would actually hurt many people, as they would delay receiving tax refunds that they are owed.
According to current IRS data, millions of taxpayers who have not yet filed are actually owed a refund. There is a lot of money being held by Uncle Sam that belongs to every day people — the number of refunds issued so far this year has dropped by 12% over last year, and the amount of refunds issued is down by $30 billion.
Many people could use their part of that $30 billion to pay bills.
In any given year, almost 3 in 4 people receive a tax refund averaging $3,000. Delay filing deadline and you delay that $3,000 to a family.
Many people have busy lives and wait until the last minute to file every year. Based on prior years, an estimated 35 million people (25% of all tax filers) wait until the last two weeks of tax season (April 1-15) to file. Of these 35 million taxpayers, more than half receive a refund averaging $2,000.
It is personally expensive, and yet many individuals procrastinate filing their taxes because they don’t like doing the paperwork, even if it means a delay in receiving their refund.
Any effort to further extend the tax filing deadline past July 15 would benefit the government, at the cost to individuals, by giving the IRS a de facto extension on the interest-free loan that it receives from many individuals when they overpay their taxes throughout the year.
Extending tax filing past the 2020 election would also conceal the benefits of the Trump tax cuts for millions of families. Thanks to the Tax Cuts and Jobs Act, the typical family of four has seen a tax cut of more than $2,000, equating to a nearly 60% reduction in federal income taxes.
Joe Biden has vowed to repeal these tax cuts, raising taxes on 90% of the country.
Keeping the tax deadline now and ensuring it is before the 2020 election is an opportunity to highlight the lower taxes and contrast it with the higher taxes that families and individuals will pay under a Biden presidency.
People should be required to file by July 15, but there is no reason to demand they pay additional owed taxes right now. The Treasury should consider extending tax payment deadlines to offer liquidity to individuals and businesses.
In July, businesses and individuals will be required to make roughly $1 trillion in tax payments to the IRS. This starts with roughly $50 billion in excise tax payments due July 1 but will also include estimated tax payments for the first and second quarter of the year and income tax payments for individuals and small businesses.
This is a significant transfer of cash from the private sector to the federal government and will deprive taxpayers of much-needed liquidity as they look to recover from the economic damages of COVID-19.
This doesn’t need to be the case. As noted by a coalition of conservative groups that recently wrote to Treasury Secretary Steven Mnuchin, the Treasury can step in and help taxpayers through this crisis by using its regulatory authority to defer tax payments through the end of the year. This will allow businesses to prioritize paying workers and meeting expenses over making tax payments and will help individuals and families make ends meet.
This is a modest step toward providing emergency liquidity, as these taxes will eventually be repaid.
The pandemic and the reaction to it by the various governors have damaged the financial well-being of businesses and workers across the country. The federal government has spent a great deal of money to reduce this damage. Moving forward, Mnuchin should build on this success not by tossing more tax dollars in the air but by delaying tax payment deadlines through the end of the year.
He should also ensure that the tax filing deadline is kept in place so that people are encouraged to file and receive the refunds that they are owed.
Grover Norquist is president of Americans for Tax Reform.
