IRS allowing more time to file federal tax returns and to pay federal taxes
The IRS has announced that taxpayers will be allowed to defer until July 15, 2020 the filing of their federal tax returns and the payment of their federal taxes that were otherwise due between April 1, 2020 and July 15, 2020 (the “Relief Period”).
On Friday, March 13, 2020, the IRS issued Notice 2020-17 extending the deadline for the payment of federal income taxes on a limited basis. On Friday, March 20, 2020, the IRS issued Notice 2020-18 updating and expanding previously issued relief under Notice 2020-17 to include all federal income tax payments and also to postpone the filing date for federal income tax returns. On March 24, 2020, the IRS published Filing and Payment Deadlines Questions and Answers on its website that clarifies certain aspects of Notice 2020-18. On Friday, March 27, 2020, the IRS issued Notice 2020-20 to address the deadlines related to gift taxes and generation skipping transfer (GST) taxes. On Thursday, April 9, 2020, the IRS issued Notice 2020-23, extending the deadlines for all federal tax filings and payments due during the Relief Period.
Taken together, this new guidance provides:
- All Taxpayers Covered. Relief is available to all types of taxpayers with federal income tax payments or tax returns due on April 15, 2020 – individuals, trusts, estates, partnerships, associations, companies and corporations. Taxpayers do not need to be sick, quarantined or have been otherwise impacted by COVID-19 to qualify for relief.
- Filing and Payment Deadlines Extended. The due dates for filing almost federal tax returns and making almost all federal tax payments due during the Relief Period have been extended to July 15, 2020. This includes the following:
- Income taxes for individuals, corporations (including C corporations, S corporations, RIC’s, and REIT’s), partnerships, estates, and trusts for the 2019 tax year.
- Quarterly estimated income taxes for the 2020 tax year for all of the taxpayers listed above as well as tax-exempt organizations and non-resident aliens.
- Gift and generation-skipping transfer taxes.
- Estate taxes.
- Exempt organization business income taxes.
- Excise taxes on private foundations.
- The 10% tax on early withdrawals from Individual Retirement Accounts and other workplace-based retirement plans.
- October 15 Extensions. Taxpayers who are unable to file their tax returns by July 15, 2020 may file an extension to file their tax returns by October 15, 2020. This extension can now be filed by July 15, 2020.
- Unlimited Payment Relief. While the initial guidance had limited the amount of Covered Tax Payments of income tax that could be deferred to $10 million for corporations and $1 million for all other taxpayers, those limits have been removed. Taxpayers now may delay payment of the full amount of their Covered Tax Payments.
- Automatic Relief. The initial guidance had required taxpayers to file extensions to defer filing their federal income tax returns, but this new guidance does not require taxpayers do anything to take advantage of the July 15, 2020 extended filing and payment deadlines. The due dates for filing and payment are automatically changed to July 15, 2020.
- Extension for other Time-Sensitive Actions. The due dates for other time-sensitive filings and actions that fall within the Relief Period have also been extended to July 15, 2010. This includes the following (refer to Revenue Procedure 2018-58 for the full list):
- Tax-Free Exchange: The 45-day deadline to identify qualified replacement property in a tax-free exchange under IRC 1031 and the 180-day deadline to close a tax-free exchange.
- Section 83(b) Election: The 30-day deadline to file an election under IRC 83(b) to include in gross income the excess fair market value of substantially non-vested property over the amount paid for the property.
- Qualified Opportunity Zone Rollovers: The 180-day deadline to reinvest capital gains in a qualified opportunity zone under IRC 1400Z-2.
- Retirement Plan Contributions: Making a contribution for 2019 to retirement plan accounts, such as Individual Retirement Accounts, Health Savings Accounts and Archer Medical Savings Accounts, and Coverdell Education Savings Accounts. This includes an extension of the 60-day deadline to make eligible rollover contributions.
- Distribution of Excess Elective Deferrals: The deadline for taking out excess elective deferrals made to workplace-based retirement plans in 2019.
- Qualified Small Business Stock Rollover: The 60-day deadline to rollover gain from the sale of qualified small business stock into another qualified small business stock.
- Entity Classification Elections: The requirement to file an entity classification election on Form 8832 within 75 days of the desired effective date.
- Elections to Treat Stock Sales as Asset Sales: The deadline to file an election under IRC 338(h)(10) to treat a qualified stock purchase as an asset sale for federal income tax purposes by the 15th day of the ninth month after the acquisition date.
- Purchase of ESOP Qualified Replacement Property: The deadline to purchase qualified replacement property within 12 months of the sale of qualified securies to an ESOP.
- QSUB Elections: The 75-day deadline to file an election to treat an eligible subsidiary as a qualified subchapter S subsidiary.
- Abated Penalties and Interest. For purposes of determining penalties and interest on late payments of federal taxes included in the relief, the period from April 15, 2020, to July 15, 2020, will be ignored.
While the IRS announcement only applies to taxes due to the federal government, a number of states have also announced their own extensions of time to file or pay taxes. Some states already have indicated that they will follow any extension of time granted by the federal government. See our post here for additional information.