(This post is time sensitive and only applies to returns due and income tax payments due on April 15, 2020)
The IRS has provided relief for taxpayers affected by the ongoing Coronavirus epidemic.
The IRS has released Notice 2020-18 providing guidance on the postponing of the tax due date for 2019 calendar year individual returns due on April 15, 2020. President Trump issued an emergency declaration under the Stafford Act on March 13, 2020.
The Emergency Declaration instructed the Secretary of the Treasury “to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate, pursuant to 26 U.S.C. 7508A(a).”
Section 7508A provides the Secretary of the Treasury or his delegate (Secretary) with authority to postpone the time for performing certain acts under the internal revenue laws for a taxpayer determined by the Secretary to be affected by a Federally declared disaster as defined in section 165(i)(5)(A).
The Secretary of the Treasury has determined that any person with a Federal income tax payment or a Federal income tax return due April 15, 2020, is affected by the COVID-19 emergency for purposes of the relief described in this section III (Affected Taxpayer). The term “person” includes an individual, a trust, estate, partnership, association, company or corporation, as provided in section 7701(a)(1) of the Code.
The definition of an Affected Taxpayer is important to avoid having to determine who is eligible for this relief. So, basically if you have an income tax return that is due on April 15, 2020, you are an affected taxpayer and eligible for relief.
For an Affected Taxpayer, the due date for filing Federal income tax returns and making Federal income tax payments due April 15, 2020, is automatically postponed to July 15, 2020. Affected Taxpayers do not have to file Forms 4868 or 7004 (i.e, there is no need to file an extension on April 15, 2020). There is no limitation on the amount of the payment that may be postponed.
The relief provided in this section III is available solely with respect to Federal income tax payments (including payments of tax on self-employment income) and Federal income tax returns due on April 15, 2020, in respect of an Affected Taxpayer’s 2019 taxable year, and Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an Affected Taxpayer’s 2020 taxable year. No extension is provided in this notice for the payment or deposit of any other type of Federal tax, or for the filing of any Federal information return.
The notice as written does not apply to any other type of tax return or payment (e.g., it does not apply to filing or paying payroll or unemployment taxes, and it also does not apply to state payments that might be due (although it is possible that some states might grant relief).
As a result of the postponement of the due date for filing Federal income tax returns and making Federal income tax payments from April 15, 2020, to July 15, 2020, the period beginning on April 15, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to file the Federal income tax returns or to pay the Federal income taxes postponed by this notice. Interest, penalties, and additions to tax with respect to such postponed Federal income tax filings and payments will begin to accrue on July 16, 2020.
So, basically the relief extends the filing due date and payments of taxes due on April 15, 2020 until July 15, 2020.
Impact on estimated tax payments
Taxpayers who make quarterly estimated tax payments (Form 1040-ES) generally make payments on April 15, June 15, September 15, and January 15 (of the subsequent year).
The notice delays the first quarter estimated tax payment until July 15, 2020. All other estimated tax due dates remain unchanged. So, you will need to make your second quarter and all subsequent quarterly payments on time. This results in the somewhat awkward situation of the second quarter payment being due before the first quarter payment. This is an important point to remember.
The tax issues associated with Coronavirus is an evolving issue. This post will be updated to reflect any change in guidance and any additional changes will likely be covered in a separate post.
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