The IRS has released Notice 2020-18, Notice 2020-20, and frequently asked questions (FAQs) to expand and clarify guidance issued in response to the COVID-19 pandemic that postpones the April 15 filing and payment deadlines to July 15.
Notice 2020-18 provides relief solely for federal income tax returns and income tax payments for the 2019 taxable year that are due on April 15 and estimated income tax payment for the 2020 tax year due on April 15. Notice 2020-20 amplifies Notice 2020-18 and provides relief solely for federal gift tax and generation-skipping transfer tax payments and returns (Form 709) due on April 15, 2020. The due dates for these returns and payments are automatically postponed to July 15. Interest, penalties and any other additions to tax for late filings or payments will begin to accrue on July 16. The guidance does not apply to returns or payments due on a date other than April 15. The FAQs provide clarity on several issues, but uncertainties remain and the overall relief is still limited in several important ways.
The FAQs generally provide a postponement period for any person, as defined under Section 7701(a)(1), which includes an individual, trust, estate, partnership, association, company or corporation, that has a federal income tax return or payment due on April 15. FAQ No. 3 provides a specific, exclusive list of forms that are included in the filing and payment postponement period to July 15.
Forms and payments specifically included in filing postponement guidance
- Form 1040 series (Form 1040, 1040-SR, 1040-NR, 1040-NR-EZ, 1040-PR, 1040-SS)
- Form 1041 series (Form 1041, 1041-N, 1041-QFT)
- Form 1120 series (Form 1120, 1120-C, 1120-F, 1120-FSC, 1120-H, 1120-L, 1120-ND, 1120-PC, 1120-POL, 1120-REIT, 1120-RIC, 1120-SF)
- Form 8960 (relating to the Section 1411 net investment income tax)
- Form 8991 (relating to the base-erosion and anti-abuse tax [BEAT])
- Form 990-T (but only if the form is due on April 15)
- Form 709
Fiscal-year filers, Section 965 payments and estimated payments for BEAT
The 24 FAQs also provide that the postponement for filing and paying tax to July 15 applies to:
- Fiscal-year taxpayers with a year ending in 2019 and an extended due date of April 15. Based on the FAQ’s interpretation of 2019 taxable year, it appears that a fiscal year ending in 2020 (such as partnerships and S corporations with a Jan. 31 year end) with a due date of April 15, 2020, does not qualify for relief unless additional guidance provides otherwise.
- Section 965(h) installment payments that are due on April 15
- Estimated payments for a corporation required to make BEAT payments
Postponement for filing and payment not provided BEAT
The FAQs also provide that the IRS has not issued a postponement for filing or paying tax for:
- Taxpayers with a filing or payment due date of a date other than April 15 (such as exempt organizations with a due date of May 15)
- Payroll or excise taxes
- Estate taxes
- Information returns
- Form 4466, “Corporation Application for Quick Refund of Overpayment of Estimated Tax”
June 15 estimated payments and certain extension guidance
Additionally, the FAQs confirm that the relief does not apply to estimated taxes for the second quarter, which are due on June 15, one month before the postponed first quarter payments. It is unclear at this time how the IRS will apply the applicable percentage under the annualized income installment rules for the second estimated installment payment due on June 15.
The FAQs further clarify that if a taxpayer with an unextended due date of April 15 wants to extend the time for filing a return beyond July 15, then the taxpayer should file Form 7004 or 4868 by July 15. The extended deadline will remain Oct. 15.
Taxpayers with information reporting obligations (such as Forms 3520, 3520-A, 8804, 1042, 706, etc.) should plan to file Forms 7004 or 4868 by April 15 if they need to extend the due date for filing those returns. As described previously, Notice 2020-18 and the FAQs only provide postponements for certain federal income tax returns. Taxpayers should assume that the time for filing an extension for those information returns is not postponed, and accordingly, such extensions should be filed by April 15. Furthermore, taxpayers who may have already filed a 2019 tax return but have scheduled a payment of tax for April 15 should consider rescheduling that payment for July 15. The IRS has indicated in the FAQs that a pre-scheduled payment will not be rescheduled automatically.
No postponement period for filing refund claims
The FAQs state that the postponement period does not apply to the statute of limitations for refund or credit under Section 6511. For example, if the last day for filing a refund claim for the 2016 tax year is April 15, 2020, neither Notice 2020-18 nor the FAQs postpone that date. Affected taxpayers should plan to file timely claims for refund.
The FAQs clarify that because contributions can be made to an individual retirement account (IRA) for a particular year up to the due date for filing a return for that year, taxpayers may continue to make contributions to an IRA for 2019 until July 15. Similarly, contributions may be made to a health savings account or Archer medical savings account for 2019 until July 15.
If a taxpayer owes the 10% additional tax on amounts includible in gross income from a distribution from an IRA or workplace-based retirement plan in 2019, the due date for paying that additional tax is July 15. Also, taxpayers that made excess elective deferrals to a workplace-based retirement plan in 2019 should take those excess deferrals (and income) out of the retirement plan by April 15 to exclude the distributions from income, because that particular due date was not impacted by Notice 2020-18 or the FAQs.
For employers, if the fiscal year taxpayer has a tax return due date of April 15, including extensions, the end of the grace period for making contributions to qualified retirement plans on account as of 2019 under Section 404(a)(6) is July 15.
Defined benefit and 403(b) plans
The IRS also extended the second six-year remedial amendment cycle for pre-approved defined benefit plans, postponing the following April 30 deadlines to July 31:
- The deadline for employers to adopt a pre-approved defined benefit plan and to submit a determination letter application (if eligible)
- The end of the second six-year remedial amendment cycle for pre-approved defined benefit plans
The remedial amendment period for disqualifying provisions described in Section 15.03 of Rev. Proc. 2016-37 is also extended to the end of the second six-year remedial amendment cycle, according to the guidance, which was posted on the IRS’s website. The posting provides that the third six-year remedial amendment cycle will now begin on Aug. 1, but it will still end on Jan. 31, 2025. In addition, the on-cycle submission period for providers to submit opinion letter applications for the third six-year remedial amendment cycle will remain open from Aug. 1, 2020, to July 31, 2021.
The website posting also postpones the March 31 end date of the initial remedial amendment period for Section 403(b) plans, giving plan sponsors until June 30 to update their pre-approved and individually designed plan documents.
The IRS stated that it intends to issue guidance to reflect these changes by modifying Rev. Proc. 2019-39.
The release of Notice 2020-18 and the FAQs are independent of the state and local income tax changes that will follow in response to COVID-19, including:
- Changes to filing due dates and extensions
- Adjustments to 2019 tax and 2020 estimated tax payment due dates
- Temporary relief from penalties and interest
States and localities will be required to offer specific guidance on these issues, which may take days to weeks and may take the form of executive orders from state governors, adopted legislation, or published notices released by state and local tax authorities. While some states and localities may mirror the federal relief provided, many states and localities could significantly depart from the policies adopted in Notice 2020-18. Likewise, with respect to state and local indirect tax filings and payments (including the sales and use tax, and the property tax), states and localities will need to rapidly issue special guidance to provide relief to taxpayers.
The IRS remains under pressure from the public to provide additional administrative relief, which remains possible. Notice 2020-18 acknowledges that the postponement is based on the president’s declaration of a national emergency and that the authority to provide relief is found under Section 7508A. That provision enables the IRS to postpone many more required tax deadlines and arguably provides postponement relief where the it has not acted. The relief provided by Notice 2020-18, Notice 2020-20, and the FAQs is relatively limited in scope.
Given the uncertainties on certain tax and filing matters, taxpayers with a return filing or tax payment obligation that is not covered under current IRS guidance, including the FAQs, should plan to timely file or pay by that date or file an extension by that date until additional guidance is issued by the IRS or further clarifying legislation is enacted.
Dustin Stamper is a managing director in Grant Thornton’s Washington National Tax Office and leads the tax legislative affairs practice for the firm.
Washington DC, Washington DC
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