IRS Postpones Tax Filing Deadline and Increases Payment Relief
The IRS released Notice 2020-18 (the “Notice”), which provides that the due date for filing federal income tax returns and making income tax payments otherwise due April 15, 2020, is automatically postponed until July 15, 2020. This new guidance supersedes guidance previously released last week. There is no need to file anything in order to receive this relief.
Additionally, as noted in a previous alert, in Notice 2020-17 the IRS postponed the due date for income and self-employment tax payments originally due April 15, until July 15. The IRS originally capped the amount of income and self-employment tax payments that could be postponed. However, under the new Notice, there is no longer any limit on the amount of income taxes for which payment can be postponed.
The Notice only addresses income tax returns and income and self-employment taxes due on April 15. It applies to both federal income tax payments (including payments of tax on self-employment income) for the 2019 calendar year as well as estimated income tax payments (including payments of tax on self-employment income) otherwise due on April 15 (the 1st quarter of 2020 for calendar-year taxpayers).
The July 15 due date applies to individuals, corporations, partnerships, trusts and estates with an income tax return filing and income (including self-employment) tax payment due date of April 15. It does not apply to information returns, excise tax returns, employment tax returns or any type of filing other than income tax returns. It does not apply to the payment or deposit of any tax other than income (including self-employment) taxes.
Estimated Tax Payments
The relief under the Notice clearly applies to estimated tax payments otherwise due on April 15, and postpones the due date to July 15.
However, the Notice does not address whether estimated tax payments otherwise due on June 15 (the 2nd quarter estimates for calendar-year taxpayers) will need to be made on June 15, 2020, nor whether they can be included as part of an inflated 1st quarter estimated tax payment made on July 15, 2020.
IRA and Retirement Plan Contributions
It is not clear if the postponement of the tax return filing due date similarly postpones the deadline for making IRA or HSA contributions applicable to 2019. Until we receive further guidance clarifying a postponement for the contribution deadline, we recommend that taxpayers plan to make IRA and HRA contributions for 2019 by April 15.
Similarly, clarification is needed for determining the deadline for making 2019 defined contribution retirement plan contributions (e.g., SEP contributions, employer contributions to 401(k) and other profit sharing plans, contributions to SIMPLE plans) that is, by statute, the “extended” due date of an employer’s income tax return. The quarterly and other required contributions for defined benefit plans, which are not tied to the statutory due date of an employer’s income tax return, have not been changed.
Fiscal-Year Tax Returns and Payments
At this time, relief is not granted to income tax returns or payments of fiscal-year taxpayers with due dates of May 15 or June 15. However, fiscal-year taxpayers with income tax returns currently on extension until April 15 now have until July 15 to file those extended returns.
State Tax Return Consequences
There is a flurry of activity at the state level to provide additional time for taxpayers to file and pay. While many states will allow an automatic six-month filing extension if one is granted for federal tax purposes, original state filing deadlines are not necessarily tied to original federal filing deadlines, and at this time many states have postponed their deadlines to dates earlier than the new July 15 federal extension.
Therefore, unless a state authorizes a change in the original due date, it is advised that extensions be filed. Changes in original due dates at the state level often requires administrative or even legislative action. We will be providing you state specific updates as major developments occur.
International Tax Implications
Beyond the U.S., other countries and trading blocs (e.g., European Union) are also taking steps to provide taxpayers flexibility and relief. In coordination with our colleagues throughout the Baker Tilly International network we are working to provide you updates on these items.
Please note that this is developing news. There will no doubt be more developments, and we will keep you updated as they are released. Should you have any questions, please do not hesitate to contact your tax professional team members.
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. Filing now allows you to accelerate refunds, if applicable, and at a minimum provides you important cash flow planning information. Furthermore, there is proposed legislation that, if enacted, would permit you to carryback 2019 losses for additional refunds.