President Donald Trump issued an emergency declaration on March 13, 2020 instructing the Secretary of Treasury, Steven Mnuchin, “to provide relief from [federal] tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate . . ..” Secretary Mnuchin followed those instructions earlier this week by announcing that the IRS would relax certain U.S. federal income tax payment obligations that are traditionally imposed each year on April 15. The Internal Revenue Service memorialized those U.S. federal income tax payment extension rules in IRS Notice 2020-17 (issued on March 18 and found here).
IRS Notice 2020-17 did not affect U.S. federal income tax filing rules; however, Secretary Mnuchin announced via Twitter on March 20 that, “[W]e are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest and penalties.” In what can only be described as a historic and unprecedented move and “tax law-making by Twitter,” the IRS confirmed the new tax filing deadline by re-tweeting Secretary Mnuchin’s message.
The IRS subsequently acted upon Secretary Mnuchin’s tweeted message more formally by issuing IRS Notice 2020-18 (issued the evening of March 20) that supersedes IRS Notice 2020-17 and any authority ascribed to Secretary Mnuchin’s tweet and the IRS re-tweet in their entirety. The purpose of IRS Notice 2020-18 is to restate and expand upon the relief provided in IRS Notice 2020-17. Along with IRS Notice 2020-18, the IRS issued Information Release IR-2020-58 on March 21 to provide taxpayer friendly guidance consistent with the rules announced in IRS Notice 2020-18.
Of note, the IRS has begun maintaining and updating a special page entitled Coronavirus Tax Relief on its website dedicated exclusively to IRS action targeting the coronavirus pandemic. Likewise, many states are now offering taxpayer-friendly relief similar to that which the IRS provides (discussed below).
In response to the foregoing IRS and state pronouncements, Michelman & Robinson offers this summary of the current federal tax filing and payment requirements (as well as requirements by various states) in question and answer form.
Q. Who is entitled to April 15, 2020 U.S. federal income tax return and payment relief?
A. Any taxpayer (including for this purpose, an individual, trust, estate, partnership, association, company or corporation) with a federal income tax payment (including self-employment tax payment) or a federal income tax return due on April 15, 2020 is an “Affected Taxpayer” and entitled to the taxpayer-friendly relief afforded by IRS Notice 2020-18.
Q. What is the scope and amount of this tax payment relief (e.g., does it include payments of U.S. federal estimated income taxes and taxes on self-employment income)?
A. An Affected Taxpayer is entitled to the following taxpayer-friendly relief:
- U.S. federal income tax payments (including payments of tax on self-employment income) and federal income tax returns otherwise due on April 15, 2020 in respect of the Affected Taxpayer’s 2019 taxable year are automatically postponed and are no longer due until July 15, 2020 (and such automatic postponement will not trigger any interest, penalty or addition to tax for failure to pay any such taxes or for failure to file any such tax returns)
- U.S. federal estimated income tax payments (including payments of tax on self-employment income) otherwise due on April 15, 2020 in respect of the Affected Taxpayer’s 2020 taxable year are automatically postponed and are no longer due until July 15, 2020 (and such automatic postponement will not trigger any interest, penalty or addition to tax for failure to pay any such taxes)
In addition, Notice 2020-18 makes clear that:
- Affected Taxpayers do not have to file IRS Form 4868 (Application for Automatic Extension of Time To File U.S. Individual Income Tax Return) or IRS Form 7004 (Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns) to obtain the automatic postponement described above
- There is no limitation on the amount of the federal tax payments described above that may be postponed
- No other extension is provided in Notice 2020-18 for the payment or deposit of any other type of federal tax, or the filing of any other federal information return
- Interest, penalties, and additions to tax with respect to such postponed federal tax filings and payments will begin to accrue on July 16, 2020
Q. May Affected Taxpayers obtain an additional extension of time beyond July 15, 2020 to file their federal income tax returns otherwise due on April 15, 2020 in respect of the Affected Taxpayer’s 2019 taxable year?
A. Yes, IR-2020-58 makes clear that individual taxpayers who need additional time to file beyond July 15, 2020 may request a filing extension by filing IRS Form 4868 (Application for Automatic Extension of Time To File U.S. Individual Income Tax Return) through their tax professional, tax software, or by using the Free File link on IRS.gov. Similarly, businesses that need additional time must file IRS Form 7004 (Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns).
Q. Does my state grant similar forbearance for either state income tax payments or return filing obligations?
A. Each state determines and announces its own income tax payment and return filing rules. To date, more than a handful of states, including California and Maryland, have relaxed some upcoming taxpayer obligations, and we expect more states to begin following suit. The American Institute of CPAs maintains an updated list of each state (and Puerto Rico and cities such as New York City) that provides taxpayer-friendly Coronavirus taxpayer payment or filing relief. Click here to go to the relevant AICPA information page.
Taxpayer relief for coronavirus remains a rapidly moving target at both the federal and state levels. M&R’s tax professionals are closely tracking these federal and state tax law changes, and are here to answer all of your tax-related questions at your convenience.
This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.