IRS Gives Taxpayers 3-Month Extension to Make Tax Payments and File Tax Returns

April 15, 2020

This alert was updated April 15, 2020.

As a result of the COVID-19 pandemic, most taxpayers will have additional time to file their federal tax returns and pay federal tax liabilities. On March 18, 2020, the IRS issued Notice 2020-18, which provided limited relief from federal income tax payments and filings. On April 9, 2020, the IRS issued Notice 2020-23, providing additional relief by extending more tax payment and filing deadlines. Missouri and several other states have followed suit.

As detailed below, taxpayers now have until July 15, 2020, to file federal tax returns, make tax payments, and comply with other filing obligations that would have been due on or after April 1, 2020. The dates on which taxpayers are required to make first and second quarter estimated tax payments have also been extended. This relief is automatic, as there is no requirement to file for an extension. Taxpayers who cannot file their tax returns by the extended July 15, 2020 deadline date can file for an extension until October 15, 2020, but must pay their taxes by July 15, 2020. Taxpayers that do not owe taxes should still file their returns as soon as possible to receive a refund.

Please select a link below to view answers to several common questions regarding this year's tax deadlines.

Individuals

Can I Delay Paying My Federal Income Tax Liability for 2019?

Yes. All taxpayers can defer payment of their federal income taxes that would have been due on or after April 1, 2020 and before July 15, 2020, until July 15, 2020. The taxes that can be deferred include federal income tax and self-employment tax owed for 2019, as well as first and second quarter estimated taxes for 2020. There is no limitation on the amount of tax that can be deferred.

No interest or penalties will be charged for payments made by July 15, 2020 under these rules. Interest and penalties will begin to accrue on July 16, 2020.

Taxpayers who have already filed their 2019 returns and have scheduled a payment of estimated tax for April 15, 2020 or June 15, 2020, will not automatically have their payments deferred until July 15, 2020. They should contact their bank to reschedule the payments.

Should I Still File My Federal Income Tax Return by April 15?

Maybe. If you are expecting a refund with your tax return, then you should still file on time so that you may receive your refund as soon as possible. Filing electronically, rather than filing paper returns, and electing direct deposit of tax refunds, will allow taxpayers to receive these refunds more quickly.

However, if you are not expecting a refund, the deadline for filing income tax returns that were due on April 15, 2020, has been postponed to July 15, 2020. Additionally, if your 2019 income is larger than your 2018 income, then it may be beneficial to delay filing, as doing so may increase the amount of your economic impact payment from the IRS. For more information on the economic impact payments, please see our prior alert on the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) here.

Can I Delay Paying Estimated Taxes?

Yes. All federal estimated income tax payments (including payments of tax on self-employment income) that would have been due on or after April 1, 2020 and before July 15, 2020 are due now July 15, 2020. Therefore, first and second quarter estimated tax payments due on April 15, 2020 and June 15, 2020 respectively, are deferred until July 15, 2020.

Can I Delay Paying My State Income Taxes?

Maybe. Changes are being announced on a state-by-state basis. Taxpayers should consult a qualified tax advisor regarding the rules in states where they pay taxes.

Missouri has announced that it will follow the IRS guidance and delay the due date for paying income taxes (including first and second quarter estimated tax payments) and filing income tax returns from April 15, 2020, until July 15, 2020.

Illinois has announced that it will delay the due date for paying income taxes and filing income tax returns from April 15, 2020, until July 15, 2020. However, at this time, Illinois has not extended the deadline to make estimated tax payments.

A list of announcements by state is available on the AICPA website here.

Do I Have Additional Time to Make Contributions to IRAs, Retirement Plans, HSAs, and MSAs for 2019?

Yes. The deadline for making contributions to IRAs, certain qualified retirement accounts, health savings accounts and Archer Medical Savings Accounts for 2019 is, generally, the date by which your federal income tax return must be filed. Thus, the deadline for making such contributions is now July 15, 2020.

Corporations

Can I Delay Paying My Federal Income Tax Liability for 2019?

Yes. All calendar year or fiscal year corporate income tax payments and return filing deadlines, including fiscal year S Corporations, which would have been due on or after April 1, 2020 and before July 15, 2020, do not have to be filed until July 15, 2020. Because calendar year S corporation returns were generally required to file their 2019 tax returns by March 16, 2020, most S corporations will not benefit from the deferred filing dates unless they use a fiscal year. However, S corporation shareholders can still defer filing their income tax returns and paying taxes due on their pro rata share of S corporation income until July 15, 2020. See Individuals; Can I Delay Paying My Federal Income Tax Liability for 2019? for more information.

No interest or penalties will be charged for payments made by July 15, 2020 under these rules. Interest and penalties will begin to accrue, however, on July 16, 2020.

Can I Delay Paying Estimated Taxes?

Yes. All federal estimated income tax payments that would have been due on or after April 1, 2020 and before July 15, 2020 are due now July 15, 2020.

Can I Delay the State Income Tax Payments and Filings?

Maybe. Changes are being announced on a state-by-state basis. Taxpayers should consult a qualified tax advisor regarding the rules in states where they pay taxes.

Missouri and Illinois have both announced that they will mirror the guidance provided by the IRS and delay the due date for paying corporate income taxes and filing corporate income tax returns until July 15, 2020.

Partnerships

Can I Delay Filing My Fiscal Year Partnership Filings for 2019?

Yes. All partnership filings on Form 1065, U.S. Return of Partnership Income and Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return and associated tax payments that would have been due on or after April 1, 2020, and before July 15, 2020, are due now July 15, 2020. This extension also applies to limited liability companies treated as partnerships for federal income tax purposes. Because calendar year partnership returns for 2019 were due March 16, 2020, most partnerships will not benefit from the extension. However, partners can still defer filing their income tax returns and paying taxes due on their distributive share of partnership income until July 15, 2020. See Individuals; Can I Delay Paying My Federal Income Tax Liability for 2019? for more information.

Partnerships that normally file a combined return or pay taxes on behalf of nonresident partners should check whether the due dates for these returns have been extended by the particular states involved.

Can Partnerships File an Amended Return to Receive CARES Act Benefits?

Yes. Under the current partnership audit rules enacted by the Bipartisan Budget Act (the “BBA”), partnerships (including limited liability companies treated as partnerships for federal income tax purposes) generally cannot file amended returns and must instead take the more cumbersome approach of filing an administrative adjustment request (an “AAR”). Recent IRS guidance has suspended this rule temporarily, however, allowing BBA partnerships that timely filed Forms 1065 and furnished corresponding Schedules K-1 for taxable years beginning in 2018 and 2019, to file an amended return within six months of the filing deadline as an alternative option to filing an AAR. Partnerships filing an amended return should file a Form 1065 and check the “amended return” box therein. Changes in tax rules made by the CARES Act may allow partners in partnerships to claim tax benefits that were unavailable to them when their 2018 and 2019 tax returns were originally filed. The benefits of filing an amended return should therefore be carefully analyzed. For more information on the changes made by the CARES Act, please see our prior alert here.

Can I Delay Paying Estimated Taxes?

Yes. Individual partners in a partnership can delay paying estimated taxes. All federal estimated income tax payments that would have been due on or after April 1, 2020 and before July 15, 2020 are due now July 15, 2020. See Individuals; Can I Delay Paying Estimated Taxes? for more information.

Missouri has announced that first and second quarter estimated tax payments for 2020 are now due on July 15, 2020. Illinois has not delayed the due date for estimated tax payments.

Partnerships that normally file a combined return or pay taxes on behalf of nonresident partners should check whether the due dates for these returns have been extended by the particular states involved and consult with their tax advisor.

Trust and Estates; Estate and Gift Taxes

Can I Delay Paying My Federal Tax Liability for 2019?

Yes. The following tax payments and tax return filing deadlines that would have originally have been due on or after April 1, 2020, are deferred until July 15, 2020:

  • All estate income tax payments and return filings deadlines;
  • All trust income tax payments and return filings deadlines;
  • All estate and generation-skipping transfer tax payments and return filing deadlines;
  • All gift and generation-skipping transfer tax payments and return filings deadlines; and
  • All estate tax payments of principal or interest due as a result of an election under Code Section 6161, 6163 or 6166.

No interest or penalties will be charged for payments made between April 1, 2020 and July 15, 2020 under these rules. Interest and penalties will begin to accrue on July 16, 2020.

Can I Delay Paying My State Estate Tax Liability for 2019?

Maybe. Changes are being announced on a state-by-state basis. Taxpayers should consult a qualified tax advisor regarding the rules in states where they pay taxes.

Illinois is providing a 30-day extension to estates with estate tax returns and payments that are due March 16, 2020, through March 31, 2020. Penalties will not accrue on payments made within the 30-day extension, however, interest will continue to accrue during this time. Illinois estate tax returns that would have been due on or after April 1, 2020, and before July 15, 2020, are now due July 15, 2020. However, interest will accrue on any potential estate tax due starting on the original due date at a rate of 10%.

Exempt Organizations

Can I Delay Paying and Filing My Unrelated Business Income Tax (“UBIT”) Liability?

Yes. Exempt organizations can defer payments of UBIT and other payments due on Form 990-T that would have been due on or after April 1, 2020 until July 15, 2020.

Can Private Foundations Delay Excise Tax Payments on Investment Income?

Yes. Excise tax payments on investment income and return filings on Form 990-PF, Return of Private Foundation or Form 4720, Return of Certain Excise Taxes that would have been due on or after April 1, 2020 are deferred until July 15, 2020.

Employment Taxes

Can I Delay Paying and Filing My Employment Tax Liability?

Notices 2020-18 and 2020-23 do not address deferral of employment tax returns and liabilities. Thus, for example, employers must still file Form 941, Employer’s Quarterly Federal Tax Return, reporting income tax withholding, Social Security taxes, and Medicare taxes on a timely basis. The recently enacted Families First Coronavirus Response Act, however, allows employers and self-employed individuals to reduce their employment tax liability through refundable payroll tax credits for qualified sick leave wages and qualified family leave wages. See our prior client alert on this issue here. In addition, the recently enacted CARES Act allows employers and self-employed individuals to defer the payment of certain taxes and provides new tax credits for employers that may reduce the amount of these taxes owed. See our client alert on the tax provisions of the CARES Act here.

Amended Returns

Should I Wait to File an Amended Return to Receive My CARES Act Benefits?

Maybe. Changes made by the CARES Act may allow taxpayers to claim refunds for 2018 and 2019 by filing amended returns. On April 8, 2020, the IRS advised that corporate and individual taxpayers should wait for further guidance prior to filing refund claims arising out of the CARES Act.

On April 9, 2020, the IRS issued guidance for taxpayers with net operating losses that arose during the 2018 taxable year and before June 30, 2019. Taxpayers meeting those requirements have a six-month extension to file an application for a tentative refund claim under Code Section 6411. This means that taxpayers have until June 30, 2020 to file a tentative refund claim. To apply for a tentative refund claim, corporations should use Form 1139, Corporation Application for Tentative Refund, and individuals should use Form 1045, Application for Tentative Refund.

Taxpayers should keep in mind that carrying back NOLs and claiming other tax benefits on amended returns may affect the calculation of other items on those returns. Thus, the benefits and potential adverse consequences of filing an amended return to claim these benefits should be carefully analyzed.

The IRS has also issued guidance for taxpayers to take advantage of changes made to the business interest limitations under Section 163(j) by the CARES Act. The guidance allows taxpayers to make an election related to the adjusted taxable income limitations under the CARES Act by filing an amended return.

IRS Audits, Enforcement Actions and Information

Are Enforcement Actions Delayed?

Yes. Taxpayers have until July 15, 2020 to perform “specified time-sensitive actions” that are due to be performed on or after April 1, 2020 and before July 15, 2020. “Specified time-sensitive actions" include filing Tax Court petitions, reviewing decisions rendered by the Tax Court, filing a claim for credit or refund of any tax and bringing suit for credit or refund any tax. Relief has not been granted for any petitions required to be filed with the Tax Court prior to April 1, 2020. Therefore, a taxpayer that was required to file a Tax Court petition before March 31, 2020 will not be granted an extension to file a Tax Court Petition.

Further, the IRS will have a 30-day extension for time-sensitive IRS actions for situations involving taxpayers who are currently under examination, whose cases are with the Independent Office of Appeals, or who filed an amended return under Code Section 6501(c)(7), if the last day to perform the IRS action is on or after April 6, 2020 and before July 16, 2020.

Note that other deadlines may not be extended. For example, the time for filing an S corporation election for a newly formed corporation has not been extended. Taxpayers should still file such elections on a timely basis and send such documents by registered mail-return receipt requested so they can demonstrate their elections were timely mailed.

Because most IRS offices are closed, it may be difficult to obtain tax transcripts, releases of liens or levies, installment agreements or offers in compromise during the pandemic. Taxpayers experiencing problems should consult a qualified tax advisor for assistance.

Will the IRS Delay the Issuance of Liens and Levies?

Yes. Generally, the IRS will not be issuing liens or levies, forwarding delinquent accounts, or starting new audits until July 15, 2020. However, field revenue officers will continue to pursue high-income, non-filers and perform similar activities where warranted. Moreover, Appeals officers will continue to work cases under their jurisdiction.

Can I Delay Making Installment Payments under an Installment Agreement with the IRS?

Yes. However, it is not recommended. Starting April 1, 2020, payments under existing installment agreements will be suspended until July 15, 2020. The IRS will not declare a default if a taxpayer fails to make any installment payments between April 1, 2020 and July 15, 2020. Nonetheless, interest will continue to accrue on any unpaid balance during April 1, 2020 and July 15, 2020.

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