[co-author: Mark Goldsmith]*
March 20 Update
Today, Secretary Mnuchin tweeted that the Department of the Treasury will be moving “Tax Day from April 15 to July 15 this year.” When the official Treasury Notice is released, we will update this document with details. For now, we assume that no extension will need to be filed by April 15, 2020.
The Department of the Treasury released guidance (Notice 2020-17) on March 18 confirming previous statements of Secretary Mnuchin concerning deferment of payment of final tax for many taxpayers. We expect more guidance on this topic, and will update this article as it is received.
Individuals
Do I have to file my individual federal income tax return for 2019 by April 15, 2020?
Yes, unless you apply for an extension, or you have some other reason for why the return is not due on that date (e.g., as you live outside the United States). You can obtain an extension form here: https://www.irs.gov/pub/irs-pdf/f4868.pdf. The extension is automatic if you request it, and it allows you to file by October 15, 2020, without a late filing penalty. We recommend that you file the extension via a method that allows you to prove that it was filed by April 15, 2020 (e.g., by return receipt requested by USPS).
If my return is due on April 15, 2020, and I do not file for an extension, can I be charged a penalty?
Yes. There is a penalty for not timely filing your tax return, and it is not waived by the guidance issued on March 18.
I think I will owe taxes with my individual federal income tax return for 2019. Do I have to pay them by April 15, 2020?
For individuals, you can defer the payment of the federal taxes due (including the taxes on self-employment income) up to $1 million until July 15, 2020 without penalties and interest. The $1 million limit is without regard to filing status — it is the same for a single individual or a married couple.
What if I would owe, for example, $1.5 million with my return?
If you pay $500,000 by April 15, 2020, the remaining $1 million can be deferred until July 15, 2020 without penalty or interest. If you do not pay $500,000 by April 15, 2020, but pay the full $1.5 million by July 15, 2020, the IRS will not assert the penalty for late payment of the $1 million or any interest on the deferred payment. It will, however, assert the penalties and interest on the $500,000 — the amount above the $1 million.
I should have estimated tax payments due on April 15, 2020. How are they impacted?
No penalties will be charged if the payments are made by July 15, 2020, so long as the amount due for the estimated taxes and the amount due with your 2019 federal income tax return that is deferred until July 15, 2020 is $1 million or less. Because the estimated taxes may be difficult to determine before the 2019 taxes are finalized, if you go over the $1 million amount because of estimated payments, you may have reasonable cause to request an abatement of interest and penalties.
Will similar rules apply for state and local taxes?
It is completely dependent on the states in which you are required to file income tax returns.
“C” Corporations
Do the same rules for filing the tax returns apply to taxable “C” corporations that have a December 31, 2019 tax year end?
Yes. The corporation can file for an extension. The extension is automatic if you request it and allows the corporation to file by October 15, 2020 without a late filing penalty.
Do corporations have a similar extension of time to pay?
Yes, a “C” corporation with a tax year end of December 31 can defer the payment of up to $10 million until July 15, 2020 without penalty or interest. The $10 million limit is the same for a single “C” corporation or a consolidated group of “C” corporations. The $10 million limit also covers estimated tax payments due by April 15, 2020. Current guidance provides that corporations cannot request an abatement of interest and penalties on estimated taxes that exceed the $10 million limit.
Will similar rules apply for state and local taxes?
It is completely dependent on the states in which the corporation is required to file income tax returns.
* Troutman Sanders
