On March 20, 2020, the IRS issued Notice 2020-18 (the “Notice”) which provides that the due date for making tax payments and for filing federal income tax returns is automatically extended from April 15, 2020 to July 15, 2020.
Under the Notice, any person with a Federal income tax payment or an income tax return due on April 15, 2020 is deemed “affected” by the COVID-19 virus and therefore treated as an “Affected Taxpayer” eligible for relief. All Affected Taxpayers, can defer payments due April 15, 2020 until July 15, 2020, without penalties and interest, and regardless of the amount owed or the number of filings to be postponed. This relief applies to all taxpayers including those who pay self-employment tax.
The relief provided under Notice 2020-18 also applies all federal income tax payments (including self-employment income) and tax returns due for the 2019 taxable year, as well as estimated tax payments (and self-employment income tax) due on April 15, 2020 for the taxpayer’s 2020 tax year. No extension is provided for the payment or deposit of any other type of federal tax or the filing of any federal information return.
Computation of Interest and Penalties
The period of April 15, 2020 until July 15, 2020 will be disregarded in the calculation of any interest, penalty or addition to tax for the failure to file federal tax returns or the failure to pay federal income taxes postponed by this notice. All deferred interest, penalties and additions to tax will begin to accrue on July 16, 2020.
Process for Obtaining the Extension
The extension is automatically granted by the government, therefore, taxpayers do not need to file any additional forms or call the IRS in order to qualify for relief. Individual and business taxpayers who may need additional time beyond the July 15, 2020 deadline may request a filing extension as they would in the ordinary course of business by filing Form 4868 (individuals) or Form 7004 (businesses). Individuals who are due a refund are urged to file as soon as possible and to file electronically.
IRS Filing and Payment Deadlines: Questions and Answers
After the publication of Notice 2020-18, taxpayers and tax practitioners alike had a number of open questions regarding the application and implementation of the relief. On Wednesday, March 25, 2020, the Internal Revenue Service published a Filing and Payment Deadlines Q&A to provide answers to help clarify open questions regarding the extension. The following clarifications were provided:
- Eligibility for relief: Taxpayers do not have to be sick, quarantined, or have any specific defined impact from COVID-19 in order to obtain relief. To qualify, taxpayers only need to have a federal tax payment or tax return due April 15, 2020, whether that is the original due date or the due date on extension. This includes fiscal year filers with a due date of April 15, 2020.
- Impacted tax return forms: Filing and payment of taxes reported on the following forms is postponed:
- Form 1040, 1040-SR, 1040-NR, 1040-NR-EZ, 1040-PR, 1040-SS
- Form 1041, 1041-N, 1041-QFT
- 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
- Form 8991
- Form 990-T — only if the form is due on April 15, 2020, otherwise it is not extended
- Filing due dates of March 15th May 15th, June 15th or other dates: For returns due on March 16, 2020, which include Form 1065, Form 1065-B, Form 1066, and Form 1120-S for calendar year taxpayers, those filing deadlines have not been postponed. Additionally, any taxpayers that have filing or payment dates after April 15th have not been granted relief at this time.
- Application to payroll or excise taxes: Under the Notice, there are no adjustments to the due dates for these taxes. Normal filing, payment and deposit due dates apply to payroll and excise taxes, except as modified by the CARES Act. For a summary of the relief provided to employers for payroll taxes under the CARES Act please see Nelson Mullins Tax Report: Tax Provisions of the Coronavirus Aid, Relief, and Economic Security Act.
- Application to estate and gift taxes: Originally under the Notice, there was no relief provided to the due dates for filing and payment of estate and gift taxes. However, on March 27, 2020, the IRS issued Notice 2020-20 providing that the due date for filing Forms 709 (United States Gift and Generation-Skipping Transfer Tax Return) and making payments of Federal gift and generation-skipping transfer tax due April 15, 2020, is automatically postponed to July 15, 2020. As a result of the postponement, interest, penalties and other additions to tax for failure to file or failure to pay that would generally apply during the period beginning on April 15, 2020, and ending on July 15, 2020 will be waived. Taxpayers that wish to extend their filing deadline to October 15, 2020, may file an extension by July 15, 2020.
- BEAT Estimated Payments: The due date for filing Form 8991 to make payments under section 59A (Basis Erosion and Anti-Abuse Tax, or BEAT) is postponed to July 15, 2020.
- Application to Information Returns: The relief does not apply to information returns, only to the filing of federal income tax returns due April 15, 2020.
Filing and Paying 2019 Taxes and Q1 2020 Estimated Taxes
- Filed 2019 income tax return but no payment of tax due: In order to avoid the addition of interest and penalties on amounts due, the taxpayer should pay their taxes in full by July 15, 2020. Interest and penalties will be charged after July 15th on any unpaid balance after that date.
- Application to state tax liabilities: This relief does not apply to state tax liabilities, each taxpayer should look to the relevant state for its filing and payment deadlines, which may vary. The following states in which Nelson Mullins frequently does business have issued relief:
- California — extended certain income tax filing and payment deadlines to July 15, 2020
- Colorado — extended certain payment deadlines to July 15, 2020 and certain filing deadlines to October 15, 2020
- District of Columbia — extended certain income tax filing and payment deadlines to July 15, 2020
- Florida — corporate income tax deadline extended to May 1, 2020 for calendar year filers and certain property tax payment due dates were extended from March 31, 2020 to April 15, 2020. Florida also announced certain interest and penalty waivers see order here
- Georgia — extended certain income tax filing and payment deadlines to July 15, 2020
- Maryland — extended certain income tax filing and payment deadlines to July 15, 2020
- Massachusetts — extended certain income tax filing and payment deadlines to July 15, 2020
- New York — has not yet extended income tax filing and payment deadlines
- North Carolina — extended certain income tax filing and payment deadlines to July 15, 2020
- South Carolina — extended certain income tax filing and payment deadlines to July 15, 2020
- Tennessee — extended certain income tax filing and payment deadlines to July 15, 2020
- West Virginia — extended certain income tax filing and payment deadlines to July 15, 2020
- Application to Q2 Estimated Tax Payments: Estimated tax payments for second quarter 2020 taxes are due June 15, 2020. The second quarter deadline has not yet been extended.
Individual Retirement Accounts (IRAs) and Workplace-based Retirement Plans
- IRA Contribution Date Extended: IRA contributions can be made at any time during a tax year or by the due date for the filing of a tax return for the relevant tax year. Under the relief, the deadline for making contributions to an IRA for 2019 is extended to July 15, 2020.
- IRA or Retirement Account Distributions: The filing and payment date for the 10% additional tax generally owed on amounts includible in the gross income of a taxpayer that received an IRA or retirement account distribution is also extended to July 15, 2020.
- Excess Elective Deferrals: Excess elective deferrals (and income) must be taken out of the retirement plan no later than April 15th in order to exclude those distributions from income. That date has not been extended under this relief.
- Employer Qualified Retirement Plan Contributions: The grace period applicable to employers under Section 404(a)(6) is extended to July 15, 2020. Therefore, employers have until July 15th to make contributions to its workplace-based retirement plan for such contributions to be treated as made for tax year 2019.
Health Savings Accounts (HSAs) and Archer Medical Savings Accounts (MSAs)
- Contributions to HSAs and MSAs: Contributions for the 2019 tax year may be made to HSA and Archer MSA accounts at any time through July 15, 2020 under this relief.
- Claim for a Prior Year Refund: If a taxpayer desires to file a claim for a refund for tax year 2016, the claim must be filed by April 15, 2020 in order for the claim to be timely. The relief provided does not extend this date.
- Corporate Refund of Overpayment of Estimated Tax: The time for filing Form 4466, the Corporation Application for Quick Refund of Overpayment of Estimated Tax, is not postponed. A refund may be requested by filing the corporation’s income tax return.
- Installments of 2019 Estimated Tax Payments: Relief under this notice does not change the due date for estimated tax payments required to be made during 2019. Penalty relief for failure to make these payments may be available under the normal rules.
Closure of IRS Taxpayer Assistance Centers
In response to the national emergency and to protect employees, taxpayers, communities and others, the IRS has temporarily closed all Taxpayer Assistance Centers and discontinued face-to-face service throughout the country until further notice. The IRS is continuing to process tax returns, issue refunds and help taxpayers to the greatest extent possible.
If you have any questions or would like assistance in understanding how this new law affects you, please contact Sabrina Conyers or Wells Hall, who contributed to the drafting of this Tax Report, or any member of the Nelson Mullins Tax Practice. For additional information on COVID-19 related issues, please visit the Nelson Mullins COVID-19 resource page.
 The term person includes an individual, trust, estate, partnership, association, company or corporation as such term is defined in section 7701(a)(1) of the Internal Revenue Code of 1986, as amended.