Here is the latest information on tax filing relief due to the COVID-19 outbreak.
- On 3/21/2020, the IRS announced in Notice 2020-18 that the filing deadline is moved from 4/15/2020 to 7/15/2020 for 2019 filings by individuals, trusts and estates, and corporations. No action is required by the taxpayer to qualify for this relief. No interest or penalty will be assessed if payments normally due 4/15/2020 is paid by 7/15/2020. This relief includes –
- Filings of form 1040 for the calendar year 2019.
- Filings of estimated tax for the first quarter of 2020.
It does not include any mention of the second quarter estimated tax due 6/15/2020. So, theoretically, the second quarter estimated tax is due before the first quarter on 7/15/2020. Note that this issue is later corrected by the IRS.
Observations. This means that the prior six-month extension due 4/15/2020 is now, constructively, a three-month extension due 7/15/2020. The final deadline is unchanged – 10/15/2020. So while relief is helpful in the spring, that same amount of work will have to be done by 10/15/2020. The result is that the summer and fall work will be more hectic than ever.
- On the same day, 3/21/2020, the NC Department of Revenue announced that they were following the federal relief model, with a few exceptions.
- The relief extends to individual, corporate, and franchise taxes. It does not extend to other taxes.
- NC will waive penalties for payments made by 7/15/2020 that are ordinarily due 4/15/2020, as is the federal rule. However, the IRS also will waive interest for that period. NC’s leaders do not have the power to waive interest without legislative action. Note that the state leadership of both parties has expressed interest in passing such legislation, but since they do not meet again until 4/28/2020, we cannot say absolutely by 4/15/2020 that interest relief is available for deferred NC payments.
- NC’s relief does not extend to the first quarter estimated tax for 2020, because the penalty for failing to make this payment constitutes interest.
You should consult your DMJ advisor for the latest relief afforded by other states.
- With several announcements, the IRS clarified that this relief includes many types of filings, including gift tax returns. Information returns are generally not included.
- On 4/9/2020, the IRS announced in Notice 2020-23 that it has supplemented the relief announced on 3/21/2020 with clarification and expansions. Now relief includes –
- The IRS now includes any individual or corporate estimated tax payment due between 4/1/2020 and 7/15/2020 is now due 7/15/2020. This means that individual estimated tax payment #2, originally due 6/15/2020, is now also included in relief.
- Generally, the tax statute of limitations for claiming a refund is the due date of the return for that year, plus three years. Thus, 4/15/2020 is the final date to claim a refund for the 2016 calendar tax year. Relief is extended to this claim for refund, to 7/15/2020.
- The IRS clarified that further extension of time beyond 7/15/2020 is available, but the taxpayer will need to file a request for an extension. Some had read the relief of 3/21/2020 to say that everyone was automatically extended, but that is not what it says.
Types of filings included.
When the President issued an emergency declaration under the Stafford Act, a series of IRS relief measures became available under Revenue Procedure 2018-58. The following types of tax filings are included in the filing relief listed above –
- Individuals who file a 1040 form for income, or a 709 form for gift or generation-skipping transfers.
- Corporate or partnership taxpayers, whether on a fiscal or calendar year.
- Estates or trusts who file a 1041 form.
- Exempt organizations that file forms 990, 990-T, 990-PF, or 4720. It further extends to applications for exempt status on forms 1023 or 1024.
- Benefit plans that file form 5500 series forms.
- Estimated income tax payments by individuals, corporations, and exempt organizations.
Further, Revenue Procedure 2018-58 lists dozens of pages of time-sensitive filings and actions that are extended by the disaster declaration. These include –
- IRA rollovers. Once a year, taxpayers can take a 60-day loan from their IRA funds. However this year, for distributions taken between 2/1/2020 and 5/15/2020, the re-deposit is due by 7/15/2020.
- Sections 1031 (like-kind) and 1033 (involuntary conversion) exchanges. When the last day of the 45-day identification period and the 180-day acquisition period falls after an emergency declaration, the last day is extended to the later of –
- The end of the disaster extension period (currently July 15), or
- 120 days.
However, the delay may not extend beyond
- One year, or
- The due date (including extensions) of the tax return where the transfer is disclosed.
- Qualified opportunity funds (“QOF”). Generally, when a taxpayer has an eligible capital gain, they have 180 days to reinvest that gain into a QOF in order to defer the gain. Where the gain occurs in a flow-through entity, the taxpayer may have 180 days from the end of the year of the gain. Notice 2020-23 says that where any QOF reinvestment period ends between 4/1/2020 and 7/14/2020, then that deadline is automatically extended to 7/15/2020.
- Annual elections and deposits for pass-through entities to retain a fiscal year on form 8752. This filing, normally due 5/15/2020, is delayed until 7/15/2020.
- Filing of form 2553 to elect S-corporation status. Any deadline for filing between 4/1/2020 and 7/15/2020 is automatically extended to 7/15/2020.
Let us know if you have any questions about how COVID-19 filing relief applies to you.