As many of you know, the U.S. Department of Treasury published Notice 2020-18 in response to President Trump’s March 13, 2020, pandemic declaration that COVID-19 warranted an emergency under section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act. Notice 2020-18 provides relief until July 15, 2020, from tax deadlines, payments of tax liabilities and filing of specific income tax returns for Americans who have been adversely affected by the national emergency. You can find Warner’s summary of Notice 2020-18 here.
The U.S. Treasury published a new notice on April 9, 2020, Notice 2020-23 (the “Notice”), that provides further relief for additional returns, tax payments and other actions. As a result, the extensions generally now apply to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020. Individuals, trusts, estates, corporations (including tax-exempt entities) and other non-corporate tax filers (including calendar or fiscal year partnership return filers) qualify for the extra time. This means that anyone, including Americans who live and work abroad, can now wait until July 15, 2020, to file their 2019 federal income tax return and pay any tax due.
It was previously unclear whether there would be a six-month extension available from the postponed filing deadline; the Notice clarifies that individual taxpayers that need additional time to file beyond the July 15, 2020, deadline can request an extension to Oct. 15, 2020, by filing Form 4868 on or before July 15, 2020. Businesses that need additional time must file Form 7004. An extension to file on Forms 4868 or 7004 are not an extension to pay any taxes owed by July 15, 2020. Taxpayers requesting additional time to file should estimate their tax liability and pay any taxes owed by the July 15, 2020, deadline to avoid additional interest and penalties.
The Notice also extends relief to estimated tax payments due June 15, 2020. This means that any individual or corporation that has a quarterly estimated tax payment due on or after April 1, 2020, and before July 15, 2020, can wait until July 15, 2020, to make that payment, without penalty.
The application of interest and penalties on unpaid taxes (and delayed filings) will be suspended for proper deferrals under the Notice (or otherwise as guidance indicates). In other words, interest and penalties will begin to accrue as of July 16, 2020, for all unpaid taxes that were properly deferred (likely the same for filings). Any taxpayer currently working with the Service or Treasury on delinquent taxes, however, will continue to accrue interest and penalties without suspension.
The Notice also provides that “Affected Taxpayers” will generally have until July 15, 2020, to perform all “Specified Time-Sensitive Actions” that are due to be performed on or after April 1, 2020, and before July 15, 2020.
The “Specified Time-Sensitive Actions” referred to in the Notice are described in IRS Revenue Procedure 2018-58, which can be found here. These are generally arranged by Affected Taxpayers and Code section, and include the following non-exhaustive list:
- Election of accounting methods;
- Written confirmation of charitable contributions over $500.00;
- Rollovers to ABLE accounts;
- IRC Section 303 redemptions;
- Subsidiary liquidations under IRC Section 332;
- IRC Section 338(h)(10) elections;
- Loan repayment requirements under qualified plans;
- Purchase of qualified replacement property following a sale of stock to an ESOP;
- IRC Section 645 elections to treat a trust as part of an estate;
- “65-day” election for distributions to trust beneficiaries;
- Election of the alternate valuation date under IRC Section 2032;
- Qualified disclaimers under IRC section 2046;
- ESBT and QSST elections;
- Certain LIHTC elections; and
- Identification and closing on property under IRC Section 1031 like-kind exchange provisions.
For more information regarding federal tax issues, please contact William Lentine, Jeffrey Segal, Jay Kennedy, Sean Cook or your relationship Warner attorney. The Tax Law Practice Group will continue to monitor federal and state tax issues as they develop.
