In response to the difficulties created for all Americans by the Coronavirus pandemic, taxpayers were given a recess for tax payments due on April 15, 2020 for calendar year 2019. This guidance does not change the April 15 filing deadline at this point, though further guidance is expected.
The U.S. Treasury Department and Internal Revenue Service (IRS) issued Notice 2020-17, allowing all individual and other non-corporate tax filers to defer up to $1 million of federal income tax (including self-employment tax) payments due on April 15, 2020, until July 15, 2020, without penalties or interest. The guidance also allows corporate taxpayers a similar deferment of up to $10 million of federal income tax payments that would be due on April 15, 2020, until July 15, 2020, without penalties or interest.
Under this notice, the Treasury Department and the Internal Revenue Service are providing special payment relief to individuals and businesses in response to the COVID-19 outbreak. The filing deadline for tax returns remains April 15, 2020. The Internal Revenue Service continues to urge taxpayers who are owed a refund to file as quickly as possible. For those who can’t file by the April 15th deadline, the IRS reminds individual taxpayers that everyone is eligible to request a six-month extension to file their return.
The extended payment date is expected to result in about $300 billion of additional liquidity in the economy in the near term.
Income tax payment deadlines for individual returns, with a due date of April 15, 2020, are being automatically extended until July 15, 2020, for up to $1 million of their 2019 tax due. This payment relief applies to all individual returns, including self-employed individuals, and all entities other than C-Corporations, such as trusts or estates. The Internal Revenue Service will automatically provide this extended payment relief to taxpayers. As such, taxpayers need not file any additional forms or call the Internal Revenue Service to qualify for this relief.
For C Corporations, income tax payment deadlines are being automatically extended, as well, until July 15, 2020, for up to $10 million of their 2019 tax due.
This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020.
Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. If taxpayers’ tax returns are filed by April 15, or if they request an extension of time to file by April 15, they will automatically avoid interest and penalties on the taxes paid by July 15.
The Internal Revenue Service also reminded individual taxpayers that the easiest and fastest way to request a filing extension is to electronically file Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses must file Form 7004.
This relief only applies to federal income tax payments (including tax on self-employment income) otherwise due April 15, 2020. It is important to note that the relief does not extend to deposits or payments of any other type of federal tax.
Note also that relief offered by the Internal Revenue Service does not affect state obligations and taxpayers will also need to file income tax returns in those states where they are required to do so under applicable law. There are 42 states plus the District of Columbia that require such filings, and payments. State filing and payment deadlines vary and are not always the same as the federal filing and payment deadline. To that end, the Internal Revenue Service urges taxpayers to check with their state tax agencies for more specific detail on those states in which one is required to file.
While the Notice offers welcome relief for taxpayers and our clients, we believe strongly that the relief should be followed up quickly by a second Notice providing a similar extension of time for the actual filing of tax returns. Taxpayers and practitioners alike, expected a filing extension to accompany the payment extension and without one, the challenges of meeting the April 15th filing deadline will present an incredible challenge for all. We will, of course, keep our clients, contacts and friends up to date with regular posts on these matters.