US Treasury Department and IRS issue Q&A on the 15 April 2020 extension

25 March 2020

In repose to the Coronavirus epidemic, the US Treasury Department and the Internal Revenue Service (IRS) have announced special Federal income tax return filing and payment relief. Yesterday, the IRS published a list of 24 questions and answers regarding Notice 2020-18, which it issued on 20 March 2020.

The Q&As reiterate the information in the Notice, but they do provide additional colour on the scope of the extension, and almost all of the new information is taxpayer friendly. In this overview sorted by category we summarise the key responses. Read the list carefully as some of the responses are not what practitioners had expected.

 

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Eligibility

  1. Taxpayers do not need to be sick, quarantined, or otherwise impacted by COVID-19 to qualify for relief under the Notice. (Q&A #2)
  2. Tax-exempt organizations filing a Form 990-T due 4/15/2020 are covered under the Notice. No other dues dates for this form are extended. (Q&A #3)
  3. Only the following forms are covered if they have a 4/15/2020 due date: Forms 990-T, 1040 (regular, SR, NR, NR-EZ, PR, and SS), 1041 (regular, N, and QFT), 1120 (regular, C, F, FSC, H, L, ND, PC, POL, REIT, RIC, and SF), 8961, and 8991. (Q&A #3)
  4. The Notice applies to tax returns whose extended due date is 4/15/2020. For example, a taxpayer with a FY ending in 2019 and that filed a valid extension to 4/15/2020 is covered under the Notice.  This is broader than practitioners had thought. (Q&A #4)
  5. The following taxes are not covered: payroll taxes, excise taxes, estate taxes, and gift taxes. (Q&As #6 & 7)
  6. The Notice applies to section 965 instalment payments due 4/15/2020 and to base erosion and anti-abuse tax (BEAT) payments due 4/15/2020. This is broader than practitioners had thought. (Q&As #8 & 9)
  7. The Notice applies only to Federal income tax returns and not to information returns. (Q&A #10)

Filing, Payment & Extensions

  1. If a taxpayer files an extension by 7/15/2020, then the extension to file is valid only for an additional 3 months to 10/15/2020 – not the usual 6 months. The taxpayer still has to pay by 7/15/2020.  This extension rule is less favourable than anticipated. (Q&A #12)
  2. If a taxpayer already filed his/her return and owes tax, interest and penalties will not accrue if payment in full is made by 7/15/2020. (Q&A #13)
  3. If a taxpayer has already filed his/her return and scheduled a payment of taxes for 4/15/2020, then the payment will occur on the scheduled date unless it is cancelled and rescheduled. The burden is on the taxpayer to change the date of the payment. (Q&A #14)
  4. The Notice does not postpone second quarter estimated tax payments due 6/15/2020. (Q&A #16)

IRAs & Workplace-based Retirement Plans

  1. Tax-favoured contributions to IRA accounts may be made until 7/15/2020. (Q&A #17)
  2. The 10% additional tax on 2019 distributions from an IRA or workplace-based retirement plan is extended under the Notice. (Q&A #18)
  3. Taxpayer must take excess elective deferrals out of their retirement plan by 4/15/2020 in order to exclude them from income. (Q&A #19)
  4. For employers with a Federal income tax return due 4/15/2020, the end of the grace period under section 404(a)(6) to make contributions to their qualified retirement plans on account of 2019 has been extended to 7/15/2020. (Q&A #20)

Health Savings Accounts

  1. Contributions to an HSA or Archer MSA can be made at any time up to 7/15/2020. (Q&A #21)

Refunds/Estimated Taxes

  1. Refunds for the 2016 tax year must be filed by 4/15/2020. (Q&A #22)
  2. Corporate applications for quick refunds of overpayments of estimated tax (Form 4466) must be filed by 4/15/2020. (Q&A #23)
  3. No extension is provided for estimated tax payments other than the 2020 estimated income tax payment due 4/15/2020. (Q&A #24)
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