Federal Income Tax Return Filing and Payment Relief
Last week, the Treasury Department and the Internal Revenue Service (IRS) announced that the filing deadline for certain returns has been extended from April 15, 2020 to July 15, 2020 (Notice 2020-18) and they also provided some payment relief in response to the COVID-19 national emergency. Although this is an ever-evolving and fluid situation, for the time being the Treasury Department and the IRS have clarified some of the questions taxpayers and their tax preparers are faced with. They are continuing to develop guidance on these issues, and recently shed a little more light on the current relief through the issuance of Frequently Asked Questions (FAQs).
Any person (i.e. Individual, trust, estate, corporation, or unincorporated business entity) with a Federal income tax return or payment due on April 15, 2020, is eligible for relief under the Notice. This relief does not apply to Federal income tax returns and payments due on any other date. You do not have to be sick, quarantined, or have any other specific impairment from COVID-19 to qualify.
Likewise, if you are a fiscal year filer for 2019 with a deadline of April 15, 2020, this relief applies to you. An identical deadline of July 15, 2020 applies here as well. This holds true even if your April 15, 2020 deadline has been obtained due to an extension.
This relief does not apply to payroll or excise taxes. Those returns will continue to have their normal filing, payment and deposit deadlines. Likewise, this relief does not apply to estate and gift taxes.
Notably, the IRS has not yet provided guidance on which information returns are excepted from this relief. Some information returns simply share a deadline with the person’s income tax filing deadline (e.g. Form 3520), while others actually must be filed as attachments to the income tax return (e.g. Form 8938). Information returns carry significant penalties for late filing, which can range from $10,000 to a percentage of the reportable transaction. Given the significant dollars at stake and without clarification of this guidance, many taxpayers may need to take the conservative approach and file these returns by April 15th.
The relief does, however, apply to section 965(h) installment payments, and estimated payments for corporations under section 59A and allows for a new deadline of April 15, 2020.
HOW TO FILE
You do not need to do anything specific in order to take advantage of this relief. All that must be done to qualify is to file and pay any tax due with your return by July 15, 2020. If you are an individual and unable to file by this new deadline, you may request an automatic extension of time via Form 4868 (businesses and trusts would use Form 7004) to extend your filing deadline to October 15, 2020. To avoid interest and penalties, be sure to pay the estimated tax due with your extension request by the July 15, 2020 deadline. Please note that, while the first quarter estimated tax deadline payment has been extended to July 15, 2020, the second quarter 2020 estimated income tax payment is still due on June 15, 2020.
IF YOU ALREADY FILED
If you have already filed your 2019 Federal Income tax return but have not made a payment yet, pay your taxes in full by July 15, 2020 in order to avoid interest and penalties. If payment is not made by the new deadline, interest and penalties will begin to accrue. If you have already filed, and have scheduled a payment of taxes for April 15, 2020, this payment will not automatically be rescheduled. If you would like to cancel or reschedule your payment, you may do so through the same means you scheduled payment through (ie. IRS Direct Pay, Electronic Federal Tax Payment System (EFTPS), or electronic funds withdrawal. Note that if you reschedule/cancel through EFTPS you must do so at least two business days before the scheduled payment. Likewise, if you reschedule through electronic funds withdrawal, call 888-353-4537 and make your request no later than 11:59 p.m. ET two business days prior to the scheduled payment date. If you scheduled payment by credit or debit card, call the card processor to cancel payment.
This relief does allow for more time to contribute to your IRA for 2019. The deadline for these 2019 contributions has also been extended to July 15, 2020. For more details on IRA contributions, see Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).
If you owe the 10% additional tax on amounts includible in gross income from a 2019 distribution taken from an IRA or other work-place retirement plan, the due date for paying that additional tax is now extended to July 15, 2020. Any excess elective deferrals (and income) to a work-place based retirement plan made in 2019 must be taken out of the retirement plan no later than April 15, 2020 in order to exclude the distributions from income. The grace period under section 404(a)(6) to make contributions to a qualified retirement plan for 2019 for any employer with a federal income tax return deadline of April 15, 2020 will also now have until July 15, 2020.
HSAs AND MSAs
Under this relief, contributions to Health Savings Accounts (HSAs) and Archer Medical Savings Accounts for 2019 can be made at any time up to July 15, 2020. For more details on HSA or Archer MSA contributions, see Publication 969, Health Savings Accounts and other Tax-Favored Health Plans.
The relief provided does not allow more time to claim refunds on prior tax years. Likewise, the relief does not postpone the deadline for filing Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax.
Please note that this specific relief applies only to Federal income tax payments. State filing and payment deadlines vary and are not always the same as the Federal deadlines. Be sure to reference your state tax agencies for those details.
Andreozzi Bluestein LLP is committed to continuing to represent our client’s needs during this global pandemic. If you or your client need assistance or have questions regarding your filing and payment obligations, please contact our office and we would be happy to discuss the issues with you.
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