IRS Issues New Guidance on 90-Day Extension for Tax Payments, Filing

On Tuesday, March 17, Treasury Secretary Mnuchin announced a 90-day extension for making tax payments, in response to the coronavirus pandemic (COVID-19). On Wednesday, March 18, the IRS released guidance on the extension for tax payments. Concerns about not extending the filing deadline were voiced by tax preparers and lawmakers. Treasury listened to the concerns. In a tweet on Friday, March 20, Mnuchin announced Treasury is moving “Tax Day” from April 15 to July 15. The IRS acted swiftly and released Notice 2020-18, providing guidance on the federal filing and payment extension.

On April 9, 2020, the IRS released additional guidance in the form of IRS Notice 2020-23. The most significant expansions of the postponements to July 15 are:

• April 15 estimated tax payment
• June 15 estimated tax payment
• Any income, gift, or estate tax due dates, original or extended, plus their payments, falling within the period April 1, 2020, to July 15, 2020
• All specified acts associated with income, estate, and gift tax filings within the period April 1, 2020, to July 15, 2020

Read on for answers to common questions regarding the federal tax extension.

Who gets a federal extension to file and pay taxes?

Any individual, corporation, trust, estate, or partnership with a federal income tax payment or a federal income tax return due April 15, 2020, will be granted an extension. Initially, the extension had been limited to returns (and related payments) for the 2019 tax year and estimated tax payments for the 2020 tax year.

With the updated guidance released April 9, 2020, any income, gift, or estate tax falling due within the period April 1, 2020, to July 15, 2020, now has a deadline of July 15, 2020. No income, gift, or estate tax payment is due within this period. For example, the calendar year 2019 income tax return and the related payment of tax is not due until July 15, 2020.

How long is the extension?

Taxpayers have until July 15, 2020, to file their federal income, gift, or estate tax return and pay any federal income tax liability.

Do taxpayers have to file a form on or before April 15 to get the extension?

No, an extension is not required because the due date has shifted to July 15.

Which IRS forms are included in the extension?

Any person with a federal tax payment obligation or a federal tax return or other form filing obligation that is due to be performed (either as an original filing or as a result of a valid extension) on or after April 1, 2020, and before July 15, 2020, is affected by the COVID-19 emergency. “Person” means any type of entity for Internal Revenue Code purposes (i.e., individual, corporation, partnership, estate, trust, association, company).

The postponement of the due dates includes:

• Form 1040 series
• Calendar or fiscal year corporate income tax (Form 1120 series)
• Partnerships (Forms 1065 and 1066)
• Estates and trusts (Form 1041 series)
• Estates and generation-skipping transfers (GSTs) (Form 706 series)
• Gifts and GSTs on Form 709
• Estate tax payments of principal or interest due as a result of elections deferring payment of estate tax
• Form 990 series
• Excise tax payments on investment income (Forms 990-PF and 4720)
• Quarterly estimated income taxes (split-interest trust) (Form 5227)
• Form 1041-A

Although Forms 5227, 1041-A, and 990 series are not included above, they are postponed pursuant to Rev. Proc. 2018-58 which was incorporated by Notice 2020-23.

Attachments to Specified Forms that are included in the tax deadline postponement to July 15, 2020. This includes all schedules, returns, and other forms that are filed as attachments to Specified Forms, or are required to be filed by the due date of Specified Forms. These include, as examples (not an all-inclusive list):

• Schedule H, Form 1040
• Form 3520
• Various information returns required for reporting foreign activity

Elections that are made on a timely filed Specified Form (or attachment to a Specified Form) are timely if made on or before July 15, 2020.

Payroll taxes are not changed by this notice. It appears that excise taxes reported on Form 720 are not changed.

Is there a limitation on the amount of tax payment that can be postponed?

No. Unlike the prior IRS notice that deferred up to $1 million for individuals and $10 million for corporations, there is NO limitation on the amount of tax that can be deferred to July 15.

Is the postponement for all federal tax returns and federal tax payments?

The postponement only applies to:

• Federal income tax payments, including self-employment tax; 
• Federal income tax returns for the 2019 taxable year due on April 15, 2020; and
• Federal estimated income tax payments, including self-employment tax, due on April 15, 2020, and June 15, 2020, for the 2020 taxable year
• Any income, gift, or estate tax due dates, original or extended, plus their payments, falling within the period April 1, 2020, to July 15, 2020 
• All specified acts associated with income, estate, and gift tax filings within the period April 1, 2020, to July 15, 2020

Accordingly, the postponement does not include other taxes, such as employment or excise taxes.

Which time-sensitive actions are affected?

Any person with a time-sensitive action listed in Revenue Procedure 2018-58 or Treasury Regulation Section 301.7508A-1(c)(1)(iv) – (vi) due to be performed on or after April 1, 2020, and before July 15, 2020, is an Affected Taxpayer. In essence, this appears to include every act that may need to be performed with a tax return or by the due date of a tax return, including contributions to retirement plans (including IRAs), health savings accounts, and a myriad of elections.

Has the IRS postponed any other actions?

Notice 2020-23 provides the IRS with additional time to perform time-sensitive actions. The lack of access to documents, systems, and other resources materially interferes with the IRS’s ability to timely administer the Internal Revenue Code. The following persons are also treated as Affected Taxpayers, which may delay actions with the IRS:

1. Person currently under examination;
2. Persons whose cases are with Appeals; and
3. Persons who, during the period beginning on or after April 6, 2020, and ending before July 15, 2020, file amended returns or submit payments with respect to a tax for which the time for assessment would otherwise expire. A 30-day postponement is granted.

Will the postponement of time to pay taxes and file the return be subject to penalties or interest?

No, neither penalties nor interest will apply as long as the tax is paid and the return is filed (or extended) by July 15. There will be no penalties or interest assessed for the period April 1, 2020, through July 15, 2020.

Are state tax filing and payment obligations also extended?

This is up to each individual state. Some states have already provided extensions. Some states have not yet granted extensions, but they may do so in the near future.

Does the postponement apply to payments or returns due in May or June?

Yes, in light of the additional guidance released April 9, 2020, the postponement does apply to payments or returns due in May or June.

Does the postponement apply to second quarter estimated tax payments due June 15?

With the additional guidance released April 9, 2020, second quarter estimated income tax payments due on June 15, 2020, do get an extension to July 15.

If we apply for an extension at July 15, 2020, will that extend the return to October 15, 2020 or January 15, 2021 (six months)?

Taxpayers may extend their tax returns to the normal extension date if the tax return is not ready to be filed at July 15, 2020. In some cases, July 15, 2020 is the final due date. For example, the June 30, 2019 C corporation tax return was originally due October 15, 2019, extended to June 15, 2020. It may not be extended beyond the July 15, 2020 due date.

If you expect a refund, you should continue to work with your tax advisor to determine your tax liability so you can get a refund as soon as possible. If you are expecting a tax liability, work with your tax advisor to determine your tax liability so you can manage your cash flow.

How we can help

Invariably, when an act is performed outside of the normal routine, complications arise. This might be due to an IRS employee who didn’t get the message, a computer program that hasn’t been updated and generates notices, or the mail taking longer to deliver. These are extraordinary times, which require extraordinary measures. Expect that filing and payment may not go as smoothly as normal. CLA’s team is here to provide guidance regarding due dates of tax returns and payments.

CLA professionals are available to help you navigate these uncertain times.

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