Notice 2020-18, released by the IRS on March 20, 2020, follows up on Treasury Secretary Steven Mnuchin’s Twitter announcement that the IRS is postponing the April 15 deadline for filing federal income tax returns until July 15, 2020. This new notice supersedes an earlier IRS notice (Notice 2020-17) that did not, as anticipated, delay the date for filing returns due on April 15, 2020, but did defer federal income tax payments until July 15, 2020, subject to certain limits.
What Does the New Notice Do?
This new guidance automatically postpones the due date for filing 2019 income tax returns due April 15, 2020, until July 15, 2020. Taxpayers do not need to file the usual extension request Forms 4868 or 7004 to qualify for the delay in filing returns.
In addition, and a major change from the earlier IRS notice, federal income tax payments (including payments of self-employment tax) in any amount can be deferred to July 15, 2020. The $1 million and $10 million limits required in Notice 2020-17 have been removed. The amount able to be deferred to July 15, 2020, includes the balance due for a taxpayer’s 2019 federal income tax return and the 2020 estimated tax payment payable on April 15, 2020.
By automatically postponing the April 15 due date to July 15, 2020, other returns or events pegged to an April 15 filing date may have the potential to use the July 15 extended date, including select plan contributions. Additional research and guidance will be needed to verify the potential for these items.
COVID-19 continues to impact organizations and individuals alike.
Who Is Eligible for the Automatic Extension?
Taxpayers eligible for the new extension of the time to file, and deferral of tax payable, include individuals, trusts, estates, partnerships, associations, companies, and corporations that have a federal income tax payment or income tax return due on April 15, 2020. The IRS will waive the usual interest and penalties that apply to late tax payments and late filing of returns so long as the deferred payments are made by July 15, 2020. Any tax amount due to be paid at the end of the deferral period, and not paid, will accrue interest and potential penalties beginning July 16, 2020.
Are Other Types of Federal Returns Extended, Too?
The extension of time does not appear to apply to all types of federal returns. The relief provided in Notice 2020-18 is stated to be solely available with respect to federal income tax payments (including payments of tax on self-employment income) and federal income tax returns due on April 15, 2020, for the 2019 tax year and federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020 for the 2020 tax year. However, as noted before, additional information on the availability to affect other return types is being investigated.
Will States Follow the IRS’ Lead?
Some have already indicated they will follow the IRS positions being taken. But, each state will need to separately address its own extensions of tax filing and payment dates. The American Institute of Certified Public Accountants is keeping an up-to-date listing of state filing guidance in response to the coronavirus here. The Federation of Tax Administrators also has convenient links to state filing guidance here.
The Impact of Coronavirus on the Tax Filing Deadline
The filing extension comes after much feedback to the IRS in the wake of COVID-19. While the filing deadline is extended, there could still be substantial impacts to tax planning in the future.
Questions on tax planning in the wake of the deadline change?
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