Knowledge and Insights

This week in Notice 2020-18, the Treasury Department and the Internal Revenue Service (IRS) announced special federal income tax return filing and payment relief in response to the ongoing Coronavirus (COVID-19) emergency.  This notice expands on and supersedes 2020-17 issued on March 18, 2020.  Just as news of the virus changes frequently, so does the government’s response in this unprecedented time. With all this sensory overload how does one determine what is relevant to their own circumstance?

Below we break down some of the most pressing topics related to the relief provided in Notice 2020-18. Please note the relief described herein applies only to federal income tax payments, as not all states have come to an official decision on this matter at this time. The information is fluid and designed to be a flexible tool to communicate information to taxpayers. The answers to these questions provide responses to general inquiries and are not citable as legal authority. Accordingly, the Treasury Department and the IRS are continuing to consider additional Internal Revenue Bulletin (IRB) guidance on these issues.

Eligibility

Any person or entity with a federal income tax return or payment due on April 15, 2020, is eligible for relief. Payment due refers to both 2019 federal income tax payments and 2020 estimated federal income tax payments (including payments of tax on self-employment income), regardless of the amount owed. The return or payment must be due on April 15, 2020. This relief does not apply to federal income tax returns and payments due on any other date. Estimated tax payments normally due June 15 are still due. No late filing or late payment penalties will apply during the 3-month filing and payment postponement period. Unless further relief is provided these penalties will resume after July 15, 2020.

You do not have to be sick, quarantined, or experience any other impact from COVID-19 to qualify for relief. You only need to have a federal income tax return or payment due on April 15, 2020, as described above.

It’s important to remember, the relief only applies to individuals and entities with April 15 filing deadlines. Businesses or other entities that have filing due dates on May 15, June 15, or some other date besides April 15 have not been granted relief at this time. The postponement does not include the 1065 or 1120-S returns which were due on March 16. If Form 990-T (Exempt Organization Business Income Tax) is due to be filed on April 15, it is postponed to July 15.  For taxpayers whose Form 990-T is due on May 15, that due date is NOT postponed, nor does it include FBAR filings. [However, FBARs have an automatic extension to October 15 which effectively makes October 15, 2020 the FBAR due date.] Payroll and excise taxes – normal filing, payment, and deposit due dates continue to apply. Estate and gift taxes – normal filing and payment due dates continue to apply. The relief under Notice 2020-18 does not apply to the filing of information returns.

Estimated Taxes

With respect to filing by July 15, there is no need to file any additional forms or call the IRS for the automatic federal tax filing and payment relief. However, if the July 15 deadline cannot be met, an automatic extension must be requested by July 15, 2020. If the 2019 tax liability has been properly estimated and the extension is filed timely, the extended due date for the return is October 15, 2020.

If you failed to make the required installments of estimated tax in the required amounts during 2019 for your 2019 taxable year, the relief does not change the estimated tax requirements or estimated tax penalty for 2019. Relief from the penalty may be available under the normal rules.

Second quarter 2020 estimated income tax payments are still due on June 15, 2020.

Already filed?

If an individual 2019 federal income tax return due April 15, 2020 was already filed with taxes owed but not paid, the taxes should be paid in full by July 15, 2020 to avoid interest and penalties. Interest and penalties will begin to be charged after July 15 for any amount remaining unpaid by that date.

If you arranged for electronic payments, the payment will not be automatically rescheduled to July 15. If you do nothing, the payment will be made on the date you chose. Here is how to cancel and reschedule your payment:

1. a) If you scheduled a payment through IRS Direct Pay, you can use your confirmation number from the payment to access the Look Up a Payment feature. You can modify or cancel a scheduled payment until two business days before the payment date. The email notification you received when you scheduled the payment will contain the confirmation number.
2. b) If you scheduled a payment through Electronic Federal Tax Payment System (EFTPS), click on Payments from the EFTPS home page, login, then click Cancel a Tax Payment from the left menu and follow the instructions. You must do so at least two business days before the scheduled payment.
3. c) If you scheduled a payment as part of filing your tax return (authorizing an electronic funds withdrawal), you may revoke (cancel) your payment by contacting the U.S. Treasury Financial Agent at 888-353-4537. You must call to make a payment cancellation request no later than 11:59 p.m. ET two business days prior to the scheduled payment date.
4. d) If you scheduled a payment by credit card or debit card, contact the card processor to cancel the card payment.

State Taxes

Some states have yet to make a determination. The relief described herein applies only to federal income tax payments. State filing and payment deadlines vary and are not always the same as the federal filing and payment deadline. We urge you to check with your tax professional for those details. For example, as of the time we are writing this, Pennsylvania, Delaware, California and Louisiana have followed suit with due dates of July 15, 2020. New Jersey has a bill pending signature of the Governor that would change the due date to June 30, 2020 although that may change to coincide with the federal due date. New York officials have indicated in various press conferences and interviews that the due date will be moved to July 15 however, official action has yet to be taken.

That Leaves IRAs, HSAs, and MSAs

IRAs – 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 employers with a federal income tax return due date of April 15, 2020, the grace period for employers to make contributions to their qualified retirement plans on account as of 2019 is July 15, 2020. If an individual owes the 10% additional tax on early withdrawals from an IRA or workplace-based retirement plan, the reporting and payment of the 10% additional tax is extended to July 15, 2020.

HSAs & MSAs – Contributions can be made to an HSA or Archer MSA for 2019 at any time up to July 15, 2020.

Mercadien’s experts can assist you with any tax, business or other financial questions or concerns you may have regarding the Coronavirus pandemic. Please contact me at [email protected] or 609-689-2319 to discuss these matters further, and continue to check our website and LinkedIn page for further updates.

DISCLAIMER: This advisory resource is for general information purposes only. It does not constitute business or tax advice, and may not be used and relied upon as a substitute for business or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified accountant, tax practitioner or attorney licensed to practice in the jurisdiction where that advice is sought.