On March 17, 2020 Secretary of Treasury Mnuchin announced that tax payments due to the IRS by April 15, 2020 will be deferred and issued Notice 2020-17 to implement the payment deferral.
On March 23, 2020 the IRS issued Notice 2020-18 to expand (and supersede) the relief provided by the previous notice. Notice 2020-18 provides both an automatic extension of time to file federal income tax returns and pay federal income tax, self-employment tax or estimated tax due on April 15, 2020.
The new due date for both is now July 15, 2020. In addition, the IRS has posted FAQs on its website at www.irs.gov/coronavirus that clarify how this tax reporting and payment deferral will be implemented.
The following is a summary of the most important aspects of Notice 2020-18 and the new FAQs:
- Any individual, trust, estate, corporation or any type of unincorprated business entity whose federal income tax return or payment is due on April 15, 2020 is eligible for the extension of time to file and deferral of tax payment.
- The federal income tax deferral applies to federal income taxes due for the tax year 2019 (including payments on self-employment income and installment payments) and any 2020 estimated federal income tax payments.
- No extension is available for any tax returns or tax payments due on any other date, including March 16, 2020 (the due date for partnership and S-corporation federal income tax returns) and May 15 (the due date for nonprofit organizations reporting unrelated business income tax).
- No deferral is available for any payment or deposit of any other type of federal tax or for the filing of any federal information return, including payroll and excise tax returns and payments.
- There is no cap on the amount of taxes that may be deferred, and the deferral is not dependent on the taxpayer suffering from symptoms of, or direct repercussions from, COVID-19 or any related quarantine.
- This due date is automatically extended; neither IRS Forms 4868 nor 7004 need to be filed to request the extension.
- During the period between April 15 and July 15, 2020 no penalties or interest will accrue. This applies even if you have already filed your federal income tax return but have not yet paid the tax due. However, if you have already filed and scheduled your payment to be made on April 15, 2020 through IRS direct pay, electronic federal tax payment system or through your credit/debit card, the payment will not automatically be rescheduled without action by the taxpayer to cancel or reschedule it.
- Notice 2020-18 has no effect on state income tax filing and payment due dates.
While Notice 2020-18 does provide clarification on the filing and payment relief provisions, questions on this program still remain. Varnum's Tax Team will provide updates as they evolve.