Tax News & Views Holding Firm on July 15 Roundup

June 30, 2020

July 15 will remain the new April 15 this year. The IRS announced yesterday that it will not further extend the July 15 deadline for Calendar year 2019 tax filings:

The Department of the Treasury and IRS today announced the tax filing and payment deadline of July 15 will not be postponed. Individual taxpayers unable to meet the July 15 due date can request an automatic extension of time to file until Oct. 15.

Due to COVID-19, the original filing deadline and tax payment due date for 2019 was postponed from April 15 to July 15.

The IRS reminds taxpayers filing Form 1040 series returns that they must file Form 4868 by July 15 to obtain the automatic extension to Oct. 15. The extension provides additional time to file the tax return – it is not an extension to pay any taxes due.

Treasury Secretary Mnuchin last week said a further extension was being considered. No longer.

Extensions are fine. With COVID-19 flaring up in much of the country, it will be difficult for some taxpayers to get their information together in time for the deadline. If you are getting close to the deadline, an extension may be wise if it enables you to get your return right the first time.

Some taxpayers worry that extensions somehow increase the likelihood of an IRS exam. In my practice, I've seen no evidence that extending a return attracts undue IRS attention. There are two things that definitely do increase your odds of being audited:

1. Filing a return with errors; and

2. Filing a return either unextended and late or after the extension deadline.

It's always better to extend than amend.

If your extended return has a refund coming, the IRS is paying 5% interest this year back to April 15.


IRS Confirms It Has No Plans To Extend The Filing Deadline Past July 15 - Kelly Phillips Erb, Forbes. "Payment options are available on to help taxpayers who can’t pay in full and some can offer taxpayers smaller penalties. That’s important since interest and late-payment penalties will continue to accrue on any unpaid taxes."


Calendar Year 2018 Forms 1045 and 1139 Due on July 15, 2020, Not June 30, 2020 - Ed Zollars, Current Federal Tax Developments. "The IRS has posted two additional questions to the FAQ page that deals with Forms 1139 and 1045, one of which clarifies that the June 30, 2020 deadline to file either of the forms is moved to July 15, 2020 by application of Notice 2020-23."

Now they tell us.


IRS Offers Relief for Employer Retirement Plan Contributions - Jonathan Curry, Tax Notes ($):

Employers now have more flexibility when it comes to suspending or reducing some retirement plan contributions because of pandemic-induced hardship, thanks to a new IRS notice.

Notice 2020-52, 2020-29 IRB 1, aims to “provide employers with more flexibility during the COVID-19 pandemic” when it comes to reductions or suspensions of safe harbor contributions to 401(k) and 401(m) retirement plans, while also retaining some protections for those plans’ participants, according to the IRS.


Taxpayer Advocate: Pandemic Exposed Need for IRS Tech Overhaul - William Hoffman, Tax Notes ($). "The IRS needs a significant, long-term boost in technology funding from Congress to overcome paper-centric operational and service shortfalls exposed by the coronavirus pandemic, according to the national taxpayer advocate."

From the report

Taxpayers who filed a 2019 paper return and are entitled to refunds may be in for a long wait. The IRS had to suspend the processing of paper tax returns, and as of May 16, it estimated it had a backlog of 4.7 million paper returns. Although the IRS is reopening some of its core operations, it is not clear when it can open and log all the returns sitting in mail facilities.


IRS systems prepared over 20 million notices during the pandemic that could not be mailed due to closure of notice production centers between April 8 and May 31. The IRS is mailing these notices now. However, some collection notices bear old dates and include response deadlines that often have passed. The IRS plans to include “inserts” with these notices explaining that response deadlines have been postponed, but the report expresses concern that receiving compliance notices with response deadlines that have passed will be confusing and concerning to many taxpayers who may not read the inserts.

Some of these notices were put in sealed envelopes before the shutdown and are going out without the inserts.

New Taxpayer Advocate highlights COVID-19 effects on the IRS and taxpayers in her first report - Kay Bell, Don't Mess With Taxes. "Some taxpayers whose returns were mistakenly flagged by IRS processing filters are experiencing lengthy delays in receiving their refunds. (Slow issuance of refunds is a perennial Taxpayer Advocate issue, most recently cited in January.) All tax returns claiming refunds are passed through filters designed to detect identity theft and other types of refund fraud and some of these filters are producing 'false positive' rates of more than 50 percent.'

Sending Notices with Bad Dates - Keith Fogg, Procedurally Taxing. "I will repeat myself once or twice in this post but if I am reading it correctly the IRS is knowingly and intentionally creating a false entry on thousands, perhaps tens of thousands, of taxpayers’ official records of account."


Rules for Participation in the Oklahoma Business Relief Programs - Lauren Taylor, Eide Bailly. "Businesses may be awarded up to $25,000 based on two months of their average total payroll."

Iowa Narrows Tax Break for Long-Term Hotel Rentals - Bloomberg Tax ($). "Gov. Kim Reynolds (R) on Thursday signed H.F. 760, which modifies the lodging tax exemption for long-term stays at a hotel or motel. While a previous law waived all lodging taxes for hotel and motel rentals longer than 30 days, the bill provides the benefit only for stays of longer than 90 days."

The bill also exempts from the tax lodging rentals by non-profits for friends and family of hospital patients.

Iowa Law Changes Affecting 529 Plan Accounts - Patricia A. Scallon, Davis Brown Tax Law Blog. "The legislation permits certain apprenticeship program expenses and student loan repayments to be treated as 'qualified higher education expenses.'"


IRS Wants Receipts? This Tax Case Says They Are Optional - Robert W. Wood, Forbes. "The Cohan rule still allows taxpayers to prove by 'other credible evidence' that they actually incurred deductible expenses."

HOWEVER... The Cohan rule doesn't apply in two key areas.

1. For travel and meal expenses, receipts are usually required.

2. For charitable donations starting at $250, a receipt with information on the value of any goods and services is mandatory.

Just assume you will need those receipts.


Did you know? Yesterday was the 219th anniversary of the birth of Frédéric Bastiat, the economist perhaps most remembered for his parable of the broken window, explaining why disasters that cause the need for repairs and rebuilding are not good for the economy. Think "opportunity costs." May all of your windows be sturdy and clean.

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