COVID-19 Tax Update: How Have My Tax Filing And Payment Obligations Changes?
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 Disease 2019 (COVID-19) emergency. The IRS followed up the Notice with a Q&A found here, as well as Notice 2020-20, which modified some of the guidance previously provided. Notice 2020-20 is available here.
The Notices provide a number of targeted extensions for the filing of tax returns and payments of tax, but taxpayers must be aware of applicable limitations.
Am I a Taxpayer Eligible for Relief?
All “persons” that have an April 15, 2020 filing due date or a tax payment due date for a federal income tax return are entitled to relief under the Notice. “Persons” include:
- Trusts and estates; and
- Other types of unincorporated business entities.
It does not matter whether the filer has been directly affected by the COVID-19 virus or not. Fiscal year taxpayers with due dates of April 15, 2020 for returns on extension are also entitled to relief.
The relief would not typically be available for calendar year S corporations or partnerships, which have return due dates of March 15, 2020. In addition, sole proprietor farmers that do not make estimated payments typically have a due date of March 2, 2020. Finally, taxpayers that have a fiscal year would typically not have an April 15, 2020 due date.
Any returns and tax payments for an eligible taxpayer are delayed from April 15, 2020 to Juley 15, 2020.
What Taxes are Eligible for Relief?
Only returns and payments involving federal income and gift taxes are entitled to relief, such as Forms 1040, 1041, 1120, and 709. This means that the following types of returns will not receive relief:
- Estate tax returns (Form 706);
- Information returns (such as Form 990s for tax-exempt organizations); and
- Withholding and employment taxes (Forms 940 and 941).
Notice 2020-18 and the original IRS Q&A excluded gift tax returns (Forms 709) from relief; however, Notice 2020-20 explicitly provides an extension until July 15, 2020 for estate and gift tax returns due on April 15, 2020. Gift and generation-skipping transfer tax payments otherwise due on April 15, 2020 are also extended.
What About My 2020 Estimated Taxes?
Estimated taxes for the first quarter of 2020 that are normally due on April 15, 2020 are also able to be delayed until July 15, 2020. Note, however, that absent further relief, estimated tax payments will be due for both the first and second quarters on July 15.
IRAs and HSAs.
Individual taxpayers are allowed to make contributions to an IRA for 2019 until July 15, 2020. In addition, a 10% early withdrawal penalty attributable to a withdrawal in 2019 will not be payable until July 15.
You may make contributions to your health savings account (“HAS”) or Archer Medical Savings Account (“MSA”) for 2019 at any time up to July 15, 2020.
Will I be Required to File State Income Tax Returns?
The Notices only applies to Federal income, gift, and generation-skipping taxes. Each state’s income tax filing deadlines remain unchanged by the Notice, although most states (including Nebraska, Iowa, and Kansas) have provided extensions similar to the Federal Notice. These extensions, however, are generally available only for income taxes and not sales and use, property, or other state taxes.