The postponement of the tax-filing deadline to July 15 can benefit wealthy clients who depend less on their refund and who might owe taxes from stock transactions.
“If expecting a refund, file immediately,” said Bill Smith, Bethesda, Md.-based managing director for CBIZ MHM’s national tax office. Otherwise, “the taxpayer has three more months to decide when it’s best to sell assets and to determine which assets to sell to get the money to pay the taxes.”
“[It's] like an interest-free loan from the federal government. Most states are allowing similar deferrals,” said Michael G. Cumming, Bloomfield Hills, Mich.-based leader of the tax practice group at the law firm Dykema. “Our wealthy clientele is often using this period for ‘tax payment arbitrage,’ investing in vehicles that will mature concurrently with the tax-payment date.”
“Taxpayers who have a balance due could benefit from the postponement of payment of taxes either by having more time to gather the funds or holding on to the funds for the earning potential,” said Twila Midwood, enrolled agent at Advanced Tax Centre in Rockledge, Fla. “Because the market has declined in recent months, clients with a balance due are in hopes that the market turns around before the July 15 deadline.”
Individuals can also make deductible contributions to health savings accounts until July 15, which is “not in and of itself a benefit, as it delays putting funds in accounts that grow tax-free,” said Suzanne Shier, Chicago-based wealth-planning practice executive and chief tax strategist for Northern Trust Wealth Management.
Similarly, clients can fund some retirement accounts for 2019 until July 15. “That’s the deadline for a contribution to a traditional IRA, deductible or not, and a Roth IRA,” said Dean Mioli, a CPA/CFP and director of investment planning at Independent Advisor Solutions by SEI in Oaks, Pa. “If the taxpayer has a Keogh or SEP and they get [an extension] to Oct. 15, they can wait until then to put 2019 money into those accounts.”
“The real implication is that small businesses, corporations and individuals strapped for cash flow are able to utilize some of their immediate cash,” said Stein Olvasrud, executive vice president at FBB Capital Partners in Bethesda, Md. “Near term, it may be best simply to sit on the additional cash in the event that things turn considerably worse.”
For clients who owe a lot of taxes from previous filing periods, the IRS has, among other relief measures, postponed through July 15 payment requirements to such settlement programs as Installment Agreements and Offers in Compromise. Liens and levies initiated by field revenue officers are also suspended, though officers will continue to pursue high-income non-filers. Taxpayers have until July 15 for filing petitions with the Tax Court for credit or refund of tax.
“The window is relatively small, so anyone with outstanding liabilities needs to act quickly,” Smith said.
The extra time marks a chance to tax plan, said Kathy Buchs, a CPA and a director at MAI Capital Management in Cleveland. Even as the pandemic slows society to a crawl, tax legislation comes out fast, she added. “It’s difficult to stay fully informed,” she warned. “Keep in touch with your advisors, ask questions, and make sure that you’re setting yourself up for the best outcome when the pandemic resolves.”