North Carolina Waives Interest on Income Tax and Extends Other Actions

calendar iconMay 14, 2020

UPDATE: The North Carolina Department of Revenue issued additional guidance providing additional explanations and examples regarding the waiver of interest for income tax payments as well as the extension of other tax deadlines due to COVID-19.

The new guidance includes examples illustrating how the Department of Revenue will apply the interest waiver, how penalties may be avoided, and what taxpayers should do if they receive an interest or penalty assessment. Additionally, the guidance addresses situations in which an interest or penalty waiver would not apply and further explains the extension of the statute of limitations for refund claims as well as tax-related administrative and appeals-related deadlines.

Reach out to Cherry Bekaert SALT if you have any questions or would like to discuss your specific situation.

The North Carolina Department of Revenue previously extended the April 15, 2020 i filing deadline to July 15, 2020 for income and franchise tax returns originally due on April 15, from individuals, corporations, partnerships, trusts, and estates. In addition to the filing extension, no penalties will be assessed against taxpayers that file and pay their taxes after April 15, provided they file and pay on or before July 15. However, the state law in effect at the time of this extension prohibited the waiver of interest charges associated with payments received after April 15; therefore, it was noted that interest would accrue on any payments made after that date.

On May 4, new legislation was enacted that allows for the waiver of interest from April 15, through July 15, on an underpayment of tax imposed on a franchise, corporate income, or individual income tax return, including a partnership and estate and trust tax return, due from April 15, through July 15. The relief also applies to interest imposed on estimated tax payments due from April 15, through July 15.

In addition to the waiver of interest, the new legislation also includes extensions of the statute of limitations for filing refund claims and other “time-sensitive actions” to July 15. As a result, for franchise, corporate income, and individual income tax, the statute of limitations for obtaining a refund is extended to July 15, for refund claims for which the statute of limitations to seek a refund expires on or after April 15, and before July 15. Additionally, certain other actions required to be taken by a taxpayer on or after April 1, and before July 15, will be considered timely if the request or petition is filed on or before July 15.

There are distinct advantages to starting your tax return preparation process now if you have not already done so, including the acceleration of any current-year refunds you may be due. Furthermore, recently enacted federal legislation has created significant tax planning opportunities to amend prior year returns for additional refunds as well as reduce current year taxes. Most of these tax planning opportunities require significant analysis and many require separate studies. We strongly encourage you to start now.

Cherry Bekaert remains committed to providing you a superior client experience. We continue to work hard and creatively to meet your tax return needs and encourage you to submit your tax information to us as early as you can.

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