Updated March 21, 2020
In response to the Treasury Secretary’s statements, the IRS today issued Notice 2020-18 to supersede its prior guidance, Notice 2020-17, issued two days earlier.
The new Notice confirms that the extension from April 15 to July 15 applies to all taxpayers and without any taxable amount limits. Here is what we know:
- Type of taxpayer – it applies to all individuals, trusts, estates, C corporations, S corporations reporting entity level tax, and partnerships.
- Returns – it applies to all Federal income tax returns due April 15, 2020.
- Taxpayers do not need to file an extension request under Forms 4868 or 7004.
- Taxes – it applies all Federal income tax payments (including payments of tax on self-employment income) due April 15, 2020, including 2019 income taxes and 2020 estimated income tax payments.
- There is no limit on the amount of the payments that may be extended.
- It does not apply to estate or gift taxes.
- It does not apply to tax payments reportable on Form 965, relating to the repatriation tax of 2017.
- Interest & Penalties – if the income taxes postponed under the Notice are not paid by July 15, 2020, then interest and penalties on the taxes will begin to accrue on July 16, 2020.
- Notice 2017-17 is superseded and no longer the position of the IRS.
The Notice is very taxpayer friendly and resolves most if not all of the outstanding questions relating to the extension.
This Notice applies to Federal income taxes only, and not to state taxes. Many of the states are likely to follow this approach, but specific state guidance is required to make that happen.
If you have any questions regarding this notice, please reach out to your Withum tax advisor or contact us here.
Updated: March 20, 2020
On March 20th, republicans on the House Ways and Means Committee posted an update on the Treasury Secretary’s statement that the April 15th tax filing deadline will be extended to July 15, 2020.
The website post, styled in question and answer format, explains that the filing extension will apply to “all individual and business taxpayers” and to the payment of “any tax debt.” This seems to reverse the position taken by the IRS in Notice 2020-17, where it limited the payment extension to $1 million for individuals and $10 million for corporations.
The website also states that the payment extension will apply to 2019 income tax payments and to 2020 estimated income tax payments due 4/15/2020. This is identical to the IRS Notice. Of course, if a taxpayer is expecting a refund, the post reminds taxpayers that filing early is beneficial because the refund can be obtained sooner.
Last, post confirms that the IRS is working to provide additional information regarding the new tax filing extension, and that the existing IRS Notice is likely to change.
The post is helpful confirmation that the filing extension will be broadly applied, but given the way this issue has developed over the course of the past week, we will reserve on giving advice regarding the exact contours of the extension until the IRS issues additional guidance.
We will keep you posted.
Updated: March 20, 2020
The more things change the more they stay the same.
Earlier this week Secretary Mnuchin implied that there would be a 90-day tax filing and payment extension from the April 15th deadline. He said, “[j]ust file your taxes [before the new deadline and] you will automatically not get charged interest and penalties.” Then, a day later, the IRS issued Notice 2020-17 announcing a payment extension until July 15, 2020, but not a filing extension. Today, presumably in response to growing discontent, Secretary Mnuchin tweeted that the extension to July 15, 2020 would be a filing and a payment extension. He stated as follows: “[a]t [President Trump’s] direction, we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.”
It is unclear how the IRS will interpret Secretary Mnuchin’s statement. Will it eliminate the $1 million and $10 million thresholds in the IRS Notice? Will it include the April 15th estimated tax payment in the filing extension? There are lots of questions and it is hard for taxpayers to make plans based on a tweet. Hopefully the IRS acts with the same speed in issuing new guidance that it did earlier this week.
This past week has brought a lot of new legislation and regulatory guidance relating to the COVID-19 pandemic. As you read this summary, and others, please keep an eye on the publication date because changes are coming rapidly and yesterday’s guidance may not apply today.
Updated: March 18, 2020
In response to Secretary Mnuchin’s statements yesterday, the IRS today issued Notice 2020-17 (the “Notice”), providing relief for taxpayers affected by the ongoing coronavirus pandemic.
The Notice makes clear that the extension referred to by Secretary Mnuchin refers only to an extension to pay certain income taxes due on April 15, 2020, and not to an extension of the obligation to file by April 15, 2020. Thus, taxpayers remain obligated to file by April 15, 2020, either a completed tax return or a completed extension to file a tax return.
The Notice postpones the obligation to pay federal income tax (including tax on self-employment income) that would be due April 15, 2020, to July 15, 2020. For individuals, the amount of tax that can be postponed is the aggregate amount owed to the IRS, up to $1 million. For corporations, the amount of tax that can be postponed is the aggregate amount owed to the IRS, up to $10 million for each consolidated group, and $10 million for each C corporation that is not part of a consolidated group.
Key Points to Note
There are a few key points to note with regard to these rules. First, the $1 million individual limit applies equally to individuals and to married taxpayers filing jointly. No guidance has been provided for married taxpayers filing separately and whether each spouse can postpone payments up to $1 million. Second, both limits apply regardless of the total amount owed to the IRS; for example, if an individual taxpayer owes the IRS $3 million, then the payment extension applies only to $1 million, and $2 million would need to be paid by April 15, 2020. Third, both limits apply in the aggregate with regard to the sum of (i) income taxes due on April 15, 2019 with respect to the 2019 tax year and (ii) estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020 for the taxpayer’s 2020 tax year. The extension does not apply to any future estimated tax payments for the 2020 tax year. Fourth, the Notice provides no extension for the payment or deposit of any other type of federal tax, or for the filing of any tax return or information return. Finally, the Notice confirms that interest and penalties will be waived only for amount properly postponed under the Notice, and then only to the extent they are paid by July 15, 2020; interest and penalties will not be waived for any other amounts due on April 15, 2020 or for any postponed amounts that are paid after July 15, 2020.
For more specific state updates, click here.