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Year-End Planning Resources
Updated: April 11, 2020
On April 9, 2020, the IRS released Notice 2020-23 to expand the filing and payment extensions previously announced in Notice 2020-18 (relating to certain income tax filings/payments due April 15, 2020) and in Notice 2020-20 (relating to certain gift tax and GST filings/payments due April 15, 2020). This is great news for thousands of taxpayers and tax professionals.
Notice 2020-23 expands the tax filing and payment extension for all persons (including individuals, corporations, partnerships, trusts, and estates) with a return or payment obligation that is due to be performed after April 1, 2015, and before July 15, 2020. The new due date for these tax payments and filings is July 15, 2020. This extension is automatic, so no extension forms need to be filed to take advantage of the new deadline, but if any further extension beyond July 15, 2020, is needed and permitted, then the appropriate form will need to be filed though no extension will be permitted beyond the original statutory or regulatory extension date. During the extended period until July 15, 2020, no late-filing or late-payment penalty or interest will be due.
Here are some general highlights before getting into the details:
- Second-quarter estimated income tax payments for individuals and corporations that otherwise would have been due June 15, 2020, are now deferred to July 15, 2020.
- Many time-sensitive actions have been extended – for example, the date by which investors have to invest in opportunity zone funds, the date to identify a property in connection with a like-kind exchange, and the date to make certain elections in connection with M&A transactions, like elections under sections 338(h)(10) and 336(e).
- The deadline to claim tax refunds by April 15, 2020, has been extended.
Now, the details. The Notice applies in the following situations and includes all schedules and other forms that are required to be filed as attachments to the specified tax returns:
- Individual income tax payments and returns – covers Form 1040 (regular, SR, NR, NR-EZ, PR, and SS);
- Corporate income tax payments and returns, for fiscal and calendar year corporations – covers Form 1120 (regular, C, F, FSC, H, L, ND, PC, POL, REIT, RIC, S, and SF);
- Partnership tax return filings, for fiscal and calendar year partnerships – covers Form 1065 (relating to partnerships) and Form 1066 (relating to REMICs);
- Estate and trust tax payments and returns – covers Form 1041 (regular, N, and QFT);
- Estate and GST tax payments and returns – covers Form 706 (regular, NA, A, QDT, GS(T), GS(D), and GS(D-1));
- Form 706 filed pursuant to Revenue Procedure 2017-34;
- Form 8971 (relating to information regarding beneficiaries acquiring property from a decedent) and any supplemental Form 8971, including all requirements contained in section 6035(a);
- Gift and GST tax payments and returns – covers Form 709 that is due on the date an estate is required to file Form 706 or Form 706-NA;
- Estate tax payments of principal and interest due as a result of an election under sections 6166, 6161, 6163, and annual recertification requirements under section 6166;
- Exempt organization business income tax and other payments and returns on Form 990-T
- Excise tax payments on investment income and returns – covers Form 990-PF and Form 4720; and
- Quarterly estimated income tax payments – covers Form 990-W, Form 1040-ES (regular, ES (NR), ES (PR)), Form 1041-ES, and Form 1120-W.
The Notice also extends the due date to July 15, 2020, for the following time-sensitive actions that are due to be performed after April 1, 2015, and before July 15, 2020:
- Investing realized capital gain in a Qualified Opportunity Fund within the 180-day period in section 1400Z-2(a)(1)(A);
- Filing a petition with the U.S. Tax Court, or for review of a decision rendered by the Tax Court;
- Filing a claim for credit or refund of any tax;
- Bringing suit upon a claim for credit or refund of any tax; and
- Any time-sensitive action listed in Revenue Procedure 2018-58, which includes things like accounting method changes, elections under section 83(b), 338(h)(10), and 336(e), and identifying property in like-kind exchanges.
Last, the Notice extends the time period for the IRS to perform certain time-sensitive actions, including with regard to persons under examination or whose cases are in the Office of IRS Appeals, and with regard to certain assessment limitations periods.
If you have questions regarding the Notice, please reach out to your Withum tax professional.
Update: March 27, 2020
On March 27, 2020, the IRS issued Notice 2020-20 to extend the April 15, 2020 filing and payment deadline for any person with a federal gift tax or generation-skipping transfer tax payment due or the requirement to file Form 709 on April 15, 2020. This notice amplifies Notice 2020-18, issued on March 20, 2020, which generally extends the filing and payment deadline for 2019 income taxes and 2020 estimated income taxes due April 15, 2020.
The Notice applies all “persons” (as defined in section 7701(a)(1)) to whom Notice 2020-18 applies, and extends to July 15, 2020 the due date for filing Forms 709 (relating to Gift and GST Returns) and making payments of federal gift and generation-skipping transfer tax due April 15, 2020. As with Notice 2020-18, this relief is automatic and no filing is required to obtain the benefit of the filing and payment extension to July 15, 2020. If a taxpayer does file Form 8892 for an extension to file Form 709 by July 15, 2020, then it will obtain an extension to file such form by October 15, 2020, but not an extension to pay the amount of tax due.
The IRS will disregard any interest and penalties during the period between April 15, 2020 and July 15, 2020, but interest and penalties will begin to accrue on July 16, 2020 if the taxpayer does not pay the correct amount of tax due at that time and file a completed tax return or timely extension.
If you have any questions regarding the Notice, please reach out to your Withum advisor.
Updated March 24, 2020
On March 24, 2020, the IRS published a list of 2 4 questions and answers regarding Notice 2020-18, which it issued on March 20, 2020. We previously wrote an article summarizing that Notice.
The Q&As reiterate the information in the Notice, but they do provide additional color on the scope of the extension, and almost all of the new information is taxpayer-friendly. Below is the new information sorted by category, and please read the list carefully because some of the responses are not what practitioners had expected.
- Taxpayers do not need to be sick, quarantined, or otherwise impacted by COVID-19 to qualify for relief under the Notice. (Q&A #2)
- Tax-exempt organizations filing a Form 990-T due April 15, 2020 are covered under the Notice. No other dues dates for this form are extended. (Q&A #3)
- Only the following forms are covered if they have an April 15, 2020 due date: Forms 990-T, 1040 (regular, SR, NR, NR-EZ, PR, and SS), 1041 (regular, N, and QFT), 1120 (regular, C, F, FSC, H, L, ND, PC, POL, REIT, RIC, and SF), 8961, and 8991. (Q&A #3)
- The Notice applies to tax returns whose extended due date is April 15, 2020. For example, a taxpayer with a FY ending in 2019 and that filed a valid extension to April 15, 2020 is covered under the Notice. This is broader than practitioners had thought. (Q&A #4)
- The following taxes are not covered: payroll taxes, excise taxes, estate taxes, and gift taxes. (Q&As #6 & 7)
- The Notice applies to section 965 installment payments due April 15, 2020 and to base erosion and anti-abuse tax (BEAT) payments due April 15, 2020. This is broader than practitioners had thought. (Q&As #8 & 9)
- The Notice applies only to Federal income tax returns and not to information returns. (Q&A #10)
Filing, Payment & Extensions
- If a taxpayer files an extension by July 15, 2020, then the extension to file is valid only for an additional 3 months to October 15, 2020 – not the usual 6 months. The taxpayer still has to pay by July 15, 2020. This extension rule is less favorable than anticipated. (Q&A #12)
- If a taxpayer already filed his/her return and owes tax, interest and penalties will not accrue if payment in full is made by July 15, 2020. (Q&A #13)
- If a taxpayer has already filed his/her return and scheduled a payment of taxes for April 15, 2020, then the payment will occur on the scheduled date unless it is canceled and rescheduled. The burden is on the taxpayer to change the date of the payment. (Q&A #14)
- The Notice does not postpone second quarter estimated tax payments due June 15, 2020. (Q&A #16)
IRAs & Workplace-based Retirement Plans
- Tax-favored contributions to IRA accounts may be made until July 15, 2020. (Q&A #17)
- The 10% additional tax on 2019 distributions from an IRA or workplace-based retirement plan is extended under the Notice. (Q&A #18)
- Taxpayer must take excess elective deferrals out of their retirement plan by April 15, 2020 in order to exclude them from income. (Q&A #19)
- For employers with a Federal income tax return due April 15, 2020, the end of the grace period under section 404(a)(6) to make contributions to their qualified retirement plans on account of 2019 has been extended to July 15, 2020. (Q&A #20)
Health Savings Accounts
- Contributions to an HSA or Archer MSA can be made at any time up to July 15, 2020. (Q&A #21)
- Refunds for the 2016 tax year must be filed by April 15, 2020. (Q&A #22)
- Corporate applications for quick refunds of overpayments of estimated tax (Form 4466) must be filed by April 15, 2020. (Q&A #23)
- No extension is provided for estimated tax payments other than the 2020 estimated income tax payment due April 15, 2020. (Q&A #24)
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 April 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.
contact a member of Withum’s Tax Services 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.
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Disclaimer: Please note this is the information that is readily available at this time, it is subject to change so please consult your Withum tax advisor.