This alert focuses on the growing number of filing and tax payment deadlines that have been postponed as a result of the COVID-19 pandemic.
The Department of the Treasury and the Internal Revenue Service recently issued Notice 2020-18 (the Notice), which provides relief to certain taxpayers by postponing the due date for certain Federal income tax payments and returns from April 15, 2020 to July 15, 2020. Notice 2020-18 supersedes the relief provided in earlier Notice 2020-17. The IRS has also provided guidance in the form of Frequently Asked Questions (FAQs) with respect to the Notice as well as other issues and expects to update the FAQs on an ongoing basis. Accordingly, taxpayers should consult the IRS website for the latest guidance.
Eligibility and Application
Federal rules – The new July 15, 2020 filing and payment deadline applies to individuals, trusts, estates, partnerships, associations, companies, and corporations that have a Federal income tax return or payment otherwise due April 15, 2020, including a payment of self-employment tax and any payment otherwise due in order to extend the 2019 tax return. This is accomplished by the grant of an automatic postponement of the April 15, 2020 deadline to July 15, 2020. The taxpayer need not be sick, quarantined or otherwise affected by the COVID-19 pandemic to qualify for this relief.
The Notice confirms that (i) no filing of an extension request is required, (ii) there is no limit on the dollar amount of any payment that may be postponed, and (iii) the IRS will not impose any interest or penalty for a failure to file or pay, so long as the return is filed and taxes are paid by July 15, 2020. Taxpayers may be able to request an additional extension of the time to file, but not the time for payment.
The IRS has also now confirmed that quarterly estimates for the first quarter of 2020 have been postponed to July 15, 2020, although second quarter estimates for 2020 are currently still due as of June 15, 2020. The Notice and the FAQs do not address how the second quarter estimates for 2020 – which typically would be reduced by the first quarterly estimates already paid – should be calculated. In other words, if the first quarterly estimates have not already been paid by June 15, 2020 when the second quarterly estimates are due, without additional relief or clarification from the IRS, the taxpayer would conceivably be required to pay the aggregate of the first and second quarterly estimates on June 15, 2020 (notwithstanding the July 15, 2020 deadline for the first quarterly estimates).
State rules – Taxpayers are cautioned to confirm deadlines for state tax returns and estimates. States may require action by their legislatures or state tax agencies to ensure conformity. The Massachusetts Legislature, for instance, recently extended the due date for personal income tax returns and payments otherwise due on April 15, 2020 to July 15, 2020, and the Massachusetts Department of Revenue issued Technical Information Release (TIR) 20-4 explaining the extended due date for returns and payments related to personal income tax, estate and trust income tax, and partnership composite returns that would have originally been due as of April 15, 2020. The Massachusetts extension is automatic, so long as taxpayers have paid at least 80% of the total amount of tax ultimately due on or before July 15, 2020. Massachusetts has also extended to July 15 the deadline for filing and paying first and second quarter 2020 estimated tax payments. While the Massachusetts Legislature has not extended the filing and payment deadlines for corporate excise returns, the Department of Revenue has announced that it will not impose late filing or late payment penalties if returns and payments are filed and made by July 15, 2020. Nevertheless, a corporate excise taxpayer must still pay the total amount required for an extension by April 15, 2020 in order to have a valid extension, which presents a bit of a trap for the unwary.
To take one additional example, New York State has similarly extended its 2019 tax return filing and payment deadlines from April 15 to July 15, 2020 for individuals, estates, and trusts, and certain corporations. See Notice N-20-2. New York has also extended to July 15 the deadline for filing and paying first quarter 2020 estimated tax payments.
IRA, HSA, MSA, and Keogh Contribution Relief
The IRS has explicitly stated that the following deadlines are also automatically postponed to July 15, 2020 –
- The deadline for making contributions to individual retirement arrangements (IRAs), health savings accounts (HSAs), and Archer Medical Savings Accounts (MSAs) in respect of 2019.
- The payment of any 10% early withdrawal penalty due with respect to distributions from various forms of retirement plans and IRAs.
- The deadline for making 2019 employer contributions (including Keogh plan contributions) for which the unextended deadline would otherwise be April 15, 2020.
Note that any distribution required because the Section 401(k) limit of $19,000 for 2019 was exceeded must still be received by April 15, 2020 in order to avoid a double tax.
The Notice makes clear that the postponement of the April 15, 2020 deadline only applies to Federal income tax returns and payments otherwise due as of April 15, 2020. It does not, for example, postpone until July 15, 2020 a return that was on extension through April 15, 2020. Second, and with the exception of gift returns and payments discussed below, the postponement only applies to Federal income tax returns and payments and not to other types of Federal tax filing and payments (such as payroll tax filing, excise tax filings, and information returns). April 15, 2020 also remains the date by which an individual must file a refund request with respect to the 2016 tax year.
Gift and Generation-Skipping Transfer Taxes
In Notice 2020-20, the IRS extended the filing and payment dates for Federal gift and generation-skipping transfer tax returns and payments from April 15, 2020 to July 15, 2020. Similar to the income tax extension, this extension is automatic and does not require the filing of an extension request. An extension request will be required to extend the filing deadline (but not the payment deadline) from July 15, 2020 to October 15, 2020. However, note that the normal filing and payment due dates for estate taxes continue to apply.
Relief and Tax Forms at a Glance
The following tables set forth the forms with respect to which filing relief is and is not available as of the date of this Alert (April 6, 2020).*Note that deadlines for filing various Federal information returns (such as the Form 990) have not been postponed.
Federal Income Tax Forms Whose Deadlines and Corresponding Payments Have Been Postponed
1040, 1040-SR, 1040-NR, 1040-NR-EZ, 1040-PR, 1040-SS
|1041, 1041-N, 1041-QF|
|1120, 1120-C, 1120-F, 1120-FSC, 1120-H, 1120-L, 1120-ND, 1120-PC, 1120-POL, 1120-REIT, 1120-RIC, 1120-SF|
|990-T (if due on April 15, 2020)|
Federal Income Tax Forms* Whose Deadlines and Corresponding Payments Have Not Been Postponed
|990-T (if due on May 15, 2020)|
|1065, 1065-B (for calendar year taxpayers)|
|1066 (for calendar year taxpayers)|
|1120-S (for calendar year taxpayers)|
*Note that deadlines for filing various Federal information returns (such as the Form 990) have not been postponed.