When a new sort of virus infection was officially identified as COVID-19 on January 7, 2020, there were many unknowns, not the least of which included effects on the economy and the tax revenue stream for Utah state and local governments.
In the wake of COVID’s devastating effects, who would have thought the Utah State Tax Commission would change to make life easier for taxpayers?
Employees Working from Home
As cases of COVID-19 reached Utah and a statewide quarantine was implemented, the Utah State Tax Commission deemed it necessary for most of its employees to start working from home. Tax Commission employees worked to ensure the transition was seamless to taxpayers, fielding the normal amount of telephone calls and requests for assistance that occurred during that time of year.
Even though the front counter at the Tax Commission was closed from about mid-March to mid-May, internal policies were modified to ensure all services could continue to be performed. Examples included: different forms of payment such as e-check and credit cards being permitted for taxpayers seeking to release a lien and tax appeals moving to online hearings with Tax Commissioners and administrative law judges conducting proceedings through virtual services.
Collection Efforts of All Types of Taxes Suspended and Modified
On March 15, all tax collection activities were suspended and only inbound calls were handled. Phase in of normal collection activities commenced on April 15 and were completely operational by June 15. The collection activities were phased in with a focus on customer service. Taxpayers were urged to set up payment plans they could afford including lower monthly payments and extension of payment time periods.
The Tax Commission suspended all garnishments from about March 15 to May 15. Both bank and wage garnishments have resumed with some exceptions:
- Leniency was granted to taxpayers that had responded to the Tax Commission to declare a time of financial hardship. Payment terms were set up to assist these taxpayers with their finances. Unfortunately, those suffering financial hardship who would not respond to Tax Commission outreach missed out on these easier payment terms.
- Bank garnishments were suspended until June 15 to ensure that stimulus payments were not garnished.
A modified payment agreement was established for those financially impacted by COVID-19 with the following provisions.
- It allowed taxpayers to skip payments for a time period.
- Taxpayers were allowed to modify payment agreements to a lower monthly installment.
- Taxpayers could claim hardship which delayed collection activity for a period of time.
Income Tax Filing Deadlines Extended
In late-March, the IRS moved the 2019 income tax filing deadline from April 15 to July 15, 2020. The Tax Commission reviewed the state statutes and found that this resulted in an automatic extension for individuals only. Almost 360,000 Utah taxpayers took advantage of that opportunity, which represents about 26% of total filers.
Unfortunately, Utah law did not permit the Tax Commission to extend the date for filing and payment of corporate income tax. On March 26, 2020, the Tax Commission approved an emergency rule (R861-1A-42) waving late filing and late payment penalties for calendar year corporations, if filed and paid by July 15, 2020.
This brought parity for corporate tax return filers with individual filers since the Tax Commission lacked the statutory authority to extend the filing date for corporate taxpayers. The Legislature agreed with the Tax Commission’s position and in a special session in May, extended the filing and payment deadline for calendar year corporations to July 15, 2020.
On March 28, 2020, the Division of Motor Vehicles (DMV), closed the lobbies of all locations to reduce face-to-face interactions and reduce the spread of the virus. It also allowed time to install protective shields and social distancing lines. During the remodeling, patrons were required to conduct business through the drive-throughs, which unfortunately, resulted in very long lines of cars and frustrated patrons.
The DMV encouraged people to conduct as much business as possible online or through “on the spot renewals.” When the lobbies were reopened in late-April, DMV established an appointment system to help ease the long lines at the drive-throughs.
A blanket renewal of International Fuel Tax Agreement (IFTA) permits were extended until July 15, 2020 to ease the burdens on the trucking industry.
Payroll Tax Deferral
By an Executive Order entitled “Presidential Memorandum of August 8, 2020,” President Trump approved a deferral of a portion of employee payroll taxes. This met with heavy resistance from employers in both the private and public sector.
There were primarily three objections to the Executive Order:
- The cost of reprogramming payroll systems,
- Deferrals had to be paid by the taxpayer when taxes were filed, and
- In the cases where taxpayers did not pay back the deferred taxes, employers were required to pay back the deferred taxes for their employees.
The Tax Commission recommended against applying the deferral for state employees, citing a significant amount of programming which would have been involved, and the prospect of employees having to repay the deferred tax by a reduced paycheck in 2021. There was also concern about liability for the state if employees left before paying back the deferred taxes.
Commission’s Customers: The Taxpayers
We commend the Tax Commission for the way it faced the many unforeseen challenges in 2020 and the way the business of the Tax Commission continued with few interruptions and with sensitivity to the individual and business taxpayers of Utah.