IRS Offers More Relief Regarding July 15 Deadline for Federal Income Tax Returns and Payments

On Friday, March 20, 2020, the IRS issued Notice 2020-18 in response to Treasury Secretary Mnuchin’s announcement that the filing deadline for returns due April 15, 2020, would be moved to July 15, 2020. Notice 2020-18 expands the relief provided to taxpayers earlier in the week by Notice 2020-17.

Read “IRS Notice 2020-17 Clarifies Income Tax Payment Deferral and Provides Additional Details”

Specifically, Notice 2020-18 automatically postpones the deadline for filing federal income tax returns and making federal income tax payments that were due April 15, 2020, to July 15, 2020, for all affected taxpayers. Treasury Secretary Mnuchin has determined that any person with a federal income tax return or federal income tax payment due on April 15, 2020, is an affected taxpayer. This relief applies to individuals, trusts, estates, partnerships, associations or corporations that had a return or payment due on April 15. 

The payments postponed by this Notice are limited to:

• Federal income tax payments, including self-employment taxes, due on April 15, 2020, for the affected taxpayer’s 2019 taxable year; and
• Federal estimated income tax payments, including self-employment taxes, due on April 15, 2020, for the affected taxpayer’s 2020 taxable year.

 Notice 2020-18 offers two significant benefits:

1. No need to file for an extension. Affected taxpayers do not need to file for an extension with the IRS by April 15 to obtain the relief provided in Notice 2020-18. While prior guidance provided for some deferral of payments, it did not extend the time affected taxpayers had to file their income tax return. Therefore, affected taxpayers would have had to either file their federal income tax return by April 15 or request an extension of time to file. 
2. There is no limit on the amount of payment an affected taxpayer may postpone. Under Notice 2020-17, the maximum federal income tax payment a taxpayer could defer was $10 million for C Corporations, whether consolidated or not, and $1 million for all other taxpayers regardless of filing status. By removing the limitation on the amount an affected taxpayer can defer and postponing the filing deadline for federal income tax returns, the Treasury Department has reduced the administrative and cash flow burdens of affected taxpayers.

While this relief is welcome for many, we believe it is in the best interest of our clients to continue to move deliberately towards completing tax returns as soon as possible. Considerations should be given for refunds, investor needs and other reporting that should not be delayed. Further, state and city guidance is incomplete, so close consideration must be given for other balances due or refund opportunities.
 
At the time of this posting, the Senate continues to work on additional COVID-19 legislation in the form of the CARES Act, which we will provide an update on once we have additional information to share.

Contact Robert Venables or a member of your service team to discuss this topic further.

Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.