Updated Per Newly Released IRS Guidance
On Friday, March 20, 2020, Treasury Secretary Steve Mnuchin announced that the federal government would postpone the federal income tax return filing deadline to July 15, 2020. Following the Treasury Secretary's announcement, the IRS released Notice 2020-18 (the "Notice") which supersedes the previously issued Notice 2020-17.
Unlike Notice 2020-17, which only postponed the due date for federal income tax payments originally due April 15, 2020, Notice 2020-18 postpones the federal income tax payment AND federal income tax return filing due date for the respective payments and returns originally due April 15, 2020. It also extends relief by eliminating payment limits eligible for relief that had been set forth in Notice 2020-17.
Overview of Notice 2020-18
Pursuant to Notice 2020-18, any person with a federal income tax payment or a federal income tax return filing due April 15, 2020 will receive an automatic postponement of such payment and filing requirement to July 15, 2020. Since the postponement is automatic, taxpayers do NOT need to file an extension form (Form 4868 or Form 7004).
For purposes of the Notice, "person" is defined to include any of the following:
The new due date of July 15, 2020 applies to 2019 tax year federal income tax returns and respective payments (including self-employment income tax payments) originally due on April 15, 2020.
The new due date of July 15, 2020 also applies to 2020 Quarter 1 federal estimated income tax payments (including self-employment income tax payments) originally due on April 15, 2020.
The Notice does not provide an extension for the payment or deposit of any other type of federal tax, or for the filing of any federal information return.
Due to the new due date, the period of April 15, 2020 through July 15, 2020 will be disregarded in the calculation of any interest, penalty, or addition to tax for the failure to file federal income returns or to pay federal income taxes postponed by the Notice. Such interest, penalties, and additions to tax with respect to the revised federal income tax return filing and federal income tax payment due date will begin to accrue on July 16, 2020.
Importantly, the Notice states, "There is no limitation on the amount of the payment that may be postponed." This effectively eliminates the $1 million (individual/trust/estate) and $10 million (corporation) limits initially set by Notice 2020-17.
Taxpayers should be aware that this Notice only applies to federal income tax payments and federal income tax return filings. While several states have announced their intention to follow the federal government payment and filing guidance, some states, such as California, have announced separate postponement dates. Other states, such as Illinois, have not yet provided guidance.
Breaking Down Notice 2020-18 by Common Questions
What does the Notice provide?
The Notice provides that federal income tax returns (and respective payments) are not due until July 15, 2020 if any of the following types of returns were originally due on April 15, 2020:
The IRS website has a full listing of all impacted tax return filing forms (see Q3).
Additionally, the Notice does not require taxpayers to make 2020 Quarter 1 estimated income tax payments until July 15, 2020.
Does the Notice impact state income tax return filings and payments?
No - This Notice only affects federal income tax return filings and federal income tax payments. Some states had previously announced their intention to follow federal guidance. Others, such as California, have provided their own revised due dates. While some, such as Illinois, have yet to provide guidance. Industry associations, such as the AICPA, are pushing for universal state conformity with the federal guidance.
Does the Notice postpone the extension date of October 15?
No - Taxpayers do not need to file an extension form (Form 4868 or Form 7004) for application of the July 15th postponement date. However, taxpayers would need to file such an extension if they need additional time to file, and the IRS website indicates that October 15th remains the extension due for tax return filings originally due April 15th (such date now postponed to July 15th).
Does the Notice affect the filing due date of FBARs (foreign bank account reporting)?
No - However, under pre-existing law, taxpayers receive an automatic extension for filing FBARs originally due on April 15, 2020 to October 15, 2020. No action is required by taxpayers to obtain this extension.
Does the Notice affect Internal Revenue Code ("IRC") Section 965 installment payments?
Yes - According to the IRS website, , the relief applies to section 965 installment payments due on April 15, 2020. Although the section 965(h) installment payment is generally made in respect of a taxpayer’s 2017 or 2018 tax year, under section 965(h)(2), the due date of the installment payment associated with a 2019 tax return is the due date of the taxpayer’s 2019 Federal income tax return. For any taxpayer whose Federal income tax return filing due date has been postponed from April 15 to July 15, 2020, the due date of that taxpayer’s section 965 installment payment has also been postponed to July 15, 2020.
Does the Notice postpone the due dates for federal incomes tax returns for partnerships and S corporations?
Yes (in part) - It pertains to such entities only if their federal income tax returns and payments were originally due on April 15, 2020, i.e. fiscal year taxpayers. Therefore, if a partnership or S corporation is a calendar-year taxpayer, the federal income tax return (and respective payments) was due March 16, 2020, and the Notice does not apply.
Does the Notice cover estates?
Yes (in part) - It only covers federal income tax filing returns and federal income tax payments originally due on April 15, 2020. Therefore, it does not cover an estate's federal estate or transfer tax.
Does the Notice cover gift tax returns and payments?
Yes - Pursuant to IRS Notice 2020-20 released on Friday, March 27, 2020, the due date for filing Form 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. The relief is automatic, and there is no need to file an extension (Form 8892) to obtain the benefit of the postponement date of July 15, 2020. However, a taxpayer would need to file Form 8892 to obtain an extension to file Form 709 by October 15, 2020. Please note that if an extension to file Form 709 by October 15, 2020 is filed, the tax payment is still due by July 15, 2020.
Does the Notice affect 2020 Quarter 2 estimated federal income tax payments originally due June 15, 2020?
No - Based on the wording of the Notice, it only affects estimated federal income tax payments originally due on April 15, 2020. Therefore, as of right now, taxpayers have relief on 2020 Quarter 1 federal estimated income tax payments that will now be due AFTER the payment date for 2020 Quarter 2 federal estimated income tax payments.
However, as we have already seen, federal guidance is fluid, and this is subject to change.
Does the Notice impact the deadline for IRA contributions intended to apply to the 2019 tax year?
Yes - According to the IRS website, contributions can be made to your IRA, for a particular year, at any time during the year or by the due date for filing your return for that year. Because the due date for filing Federal income tax returns has been postponed to July 15, the deadline for making contributions to your IRA for 2019 is also extended to July 15, 2020. For more details on IRA contributions, see Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).
Does the Notice impact the deadline for health savings account (HSA) contributions intended to apply to the 2019 tax year?
Yes - According to the IRS website, contributions may be made to your HSA or Archer MSA, for a particular year, at any time during the year or by the due date for filing your return for that year. Because the due date for filing Federal income tax returns is now July 15, 2020, under this relief, you may make contributions to your HSA or Archer MSA for 2019 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.
Does the Notice affect the filing deadlines for Like-Kind Exchanges?
No - The Notice does not extend the 180-day exchange period or the 45-day identification period under IRC Section 1031 for Like-kind Exchanges.
Does the Notice affect Section 83(b) elections?
No - The Notice does not provide an extension for the 30-day period to file an election under IRC Section 83(b) in order to include in gross income in the year of receipt property received in connection with the performance of services, e.g. partnership profits interest subject to vesting or substantial risk of forfeiture.
Does the Notice affect Qualified Opportunity Zone action dates?
No - The action dates provided under IRC 1400Z for investments in Qualified Opportunity and certain elections are not extended.
FGMK's Ask of Clients
While the federal income tax return filing and federal income tax payment deadline has been postponed, FGMK strongly encourages its clients to provide 2019 income tax return information as soon as possible.
We want to ensure our clients' timely compliance with state return and payment deadlines, if different from the federal government, and expedient client claims for income tax refunds (federal and state).
Additionally, the receipt of information as soon as possible will allow FGMK professionals optimal time to assist our clients with effective tax planning strategies during these challenging times. Such guidance may include income tax planning, as well as beneficial investment strategies, including ROTH IRA conversions and split-interest trusts, e.g. grantor retained annuity trusts ("GRATs") that can provide relief in a low interest rate environment.
Please contact your FGMK professional team for additional guidance. We are here for you during this time of need.
The summary information in this document is being provided for education purposes only. Recipients may not rely on this summary other than for the purpose intended, and the contents should not be construed as accounting, tax, investment, or legal advice. Taxpayers' positions may vary. We encourage any recipients to contact the authors for any inquiries regarding the contents. FGMK (and its related entities and partners) shall not be responsible for any loss incurred by any person that relies on this publication.
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