Tom walks us through the frequently asked questions as posted by the IRS regarding Notice 2020–18, which provides special Federal income tax return filing and payment relief in response to the ongoing COVID-19 emergency.
Filing and Payment Deadlines Questions & Answers: https://www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers
State Tax Agencies: https://www.taxadmin.org/state-tax-agencies
Illinois Income Tax Filing and Payment Extension: https://www2.illinois.gov/rev/research/publications/bulletins/Documents/2020/FY2020-24.pdf
Tax School Facebook Group: https://www.facebook.com/groups/taxschool/
Tom O’Saben coming to you from my sheltering in place office in Maryville, Illinois. Hope you’re doing well and weathering this unprecedented circumstance in our country and for that matter in our world. And I’m hoping to give you some information in this blog; it’s gonna be a little bit longer than normal, because we’re going to be addressing, Notice 2020–18 that was released by the IRS last week. For those of you who participated in my blog of last week, I made reference to Notice 2020–17, which in fact, did not extend the filing season or change the filing season. I’m going to use that term ‘change’ rather than ‘extend’ because I don’t want you to get confused with filing an extension versus the filing date having been changed. That being said, last Friday, I believe, IRS Notice 2020–18 came up, which in fact did change the filing date from April 15 to July 15. And we’re going to go through who is impacted by these, by the FAQs, frequently asked questions that the IRS released on March 24, in order to address some of the more popular questions that are coming up (and I’ve seen these out there on the Facebook page, too). So I think this is very pertinent information. I want to give you another caveat in my comments that I’m making here today. I’m not yet addressing the stimulus bill or the relief bill, I believe it’s going to be called CURES or some kind of acronym to that notion, once the House and the Senate come together, pass a bill and then the President signs it. I actually want you to watch for some marketing we’ll be sending out through Facebook, etc, or emails that we’re probably going to put together a webinar because the last I saw, there was substantial amount of tax legislation contained within this relief bill. But the point I’m trying to make of this blog today, is that we’re going to go through the frequently asked questions and there’s better than 20 questions so I’ll go as quickly as I can so I don’t take too much of your your time. But nonetheless, I’m going to go through these questions and maybe it’ll answer some of those that you have yourself and also for your clients.
So the first slide we’re going to mention right here talks about Notice 2020–18. And it does change the filing deadline from April 15 to July 15. Notice I’m not saying the term extended it, I don’t want you to get confused there. And also, we mentioned again that the IRS released the FAQs on March 24, and then we also give you the web address, where you can go look at these questions yourself. I will also tell you that on the PowerPoint slides that I put together for this blog, I took the questions right off the IRS website. I may give you some translation of what they have to say through my spoken word today. But nonetheless, the answers are coming directly from the link you saw for irs.gov. So let’s go right into this.
So question number one: who is eligible for relief under the notice? The answer comes (and we show it to you here on the slide)- any person with a federal income tax return or payment due April 15 of 2020 is eligible for this relief. We say that a person or the IRS as a person includes a taxpayer with an individual, a trust, (so 1041s would typically be due on April 15 but they’re not doing April 15. They’re doing July 15, calendar year)… An estate, a corporation -C corporations typically have that April 15 due date, don’t they? Well, in those calendar year C corporations, it looks like we’re going to July 15. And any other type of unincorporated business entity… a Schedule C, an LLC, that’s a disregarded entity filing as an individual. The payment due refers to both 2019 federal income tax payments (I’m reading to you from the q&a) including payments of tax on self employment tax, and 2020 estimated federal income tax payment. We would have Q1 estimate will be due April 15, wouldn’t it? It’s not due April 15. It’s due July 15. We’ll talk about the rest of the estimate due dates in a little bit when we get there. Okay, regardless of the amount owed now, that’s the other change that came out of 2020–18. 2020–17 was talking about not a change in the filing deadline, but in the payment deadline to July 15. And it was going to be limited, I believe, to $1,000,000. Now, that’s been taken away by 2020–18. There is no limit to the amount of tax that is due. It has been changed from April 15 to July 15.
Question number two: Do I have to actually be sick, be quarantined or have any other impact from COVID-19, the coronavirus, to qualify for payment? IRS says no. You don’t have to have any of these things; just have a federal tax to be filed that would have been due April 15. It’s due July 15. So this is not targeted to persons that are directly impacted by COVID-19.
Let’s go to question number three: it says what are the forms of the specific federal income tax returns — I think this is very useful — whose filing deadlines have been postponed or change to July 15? Answer as we show you here on the slide, the 1040 series… 1041 as I mentioned earlier. There’s 1120 our regular C corporations, Form 8960, or 8991. And you might notice that I highlighted the last two paragraphs here: 990Ts or 990s, in general, which have that December 31 year end. They’re not due April 15. They’re due May 15. And guess what? They’re still due May 15. The other thing that we noticed just a few weeks ago, how quickly we forget, remember how we were all scrambling? I know I was and I wanted to see that March 15, which turned out to be March 16 this year, date extended. It wasn’t. So for our S corporations and our partnerships, those pass through type entities — we at the very least had to file an extension. Remember my blog a couple weeks ago? We needed to get those extensions filed in order to avoid the failure to file penalty of $205 a month per partner or shareholder, up to a total of 12 months. So be careful there. If you blew that deadline, it happens to all of us, then you would be looking at trying to go ahead and get those returns processed as soon as possible. Those have not been extended. Remember, we’re dealing with an April 15 due date, a very narrow focus as to the due date. So that’s question number three.
Question number four: If you’ve got a fiscal year filer, my federal income tax return for fiscal year 2019 is due April 15 2020. Am I an effective taxpayer? The answer says Yes, you are. It changes that due date from April 15 to July 15. And you can read on from there.
Question number five: What about business or other entities that have filing due dates on May 15… June 15… or some other dates besides April 15? What do you think the answer is? Guess what? Not an April 15 deadline = not changed. No, any taxpayers who have a filing or payment due date other than April 15 have not been granted relief — watch this — at this time. Stay tuned. This is a fluid situation, it could change in a moment.
Question number six: Does the relief provided in the notice apply to payroll or excise taxes? I saw a lot of questions out there being posted by you folks on Facebook. Will we see an extension of the April 30 941 deadline? The answer says no. Under the notice normal filing payment and deposit due dates continue to apply to payroll and excise taxes.
How about Question number seven? Does the relief apply to estate and gift taxes, 706s? Remember we just saw a few slides ago that any returns that are due on April 15, like a 1041, are in fact changed to July 15. But the answer to number seven is no, normal filing and payment due dates will apply to estate and gift taxes.
Question number eight: Does the relief provided in the notice apply to Section 965(h) installment payments? Yes, it says. The relief applies to 965 installment payments due on April 15. You can read that at your leisure. I’m not going to read all of these to you.
Moving right along to question number nine — does the relief provided in the notice apply to estimated tax payments for a corporation required to make payments under Section 59A — I’ve never heard of this one — basis erosion, the anti abuse? The answer is yes. You can take a look at that if you have a taxpayer who is impacted.
Question number 10: Does the relief provided apply to the filing of information returns? The answer is again, no. And you see this kind of theme going through here that we’re only dealing with returns that are due on April 15 or had a due date of April 15.
Question number 11: I believe I saw a number of these types of questions posted on Facebook. I haven’t filed my 2019 income tax return, which would have been due on April 15. But I expect to file it by July 15. What do I need to do? Nothing. There isn’t anything that is required that your client due by April 15. Remember how I’m using the term ‘change’ in due date not extension of due date. We don’t have to scramble on April 15 to file extensions. The due date for those April 15 returns is now July 15. We won’t need an extension unless we can’t get things done by the July 15 deadline. That was question 11.
Question 12: What if I’m unable to file my 2019 return that would have been due on April 15 by July 15? Here we have Peter the Procrastinator who comes along and now even July 15 isn’t good enough. Looks like at least the guidance we have now from IRS — if you take a look at question 12 as it pops up there for you- we can file the extension. That would be our normal 4868 that we would file. But guess what, folks? This is one of the questions that I had. Would this give us until December? Nope. It’s only taking us to October. Remember, this is a fluid situation that could change but the QA that came out on March 24 says no, you can file an extension but you don’t need to file that until July 15. But it’s only going to get us to October 15 as we talk today.
Question number 13: this again popped up on Facebook, I already filed my 2019 tax return that would have been due and I owe taxes but I haven’t paid yet. What do I need to do? Again? Nothing other than pay the tax due by July the 15th.
Okay, question number 14: Alright, I’ve already done my return. I have a balance due and it’s scheduled out there to be drafted from my bank account, or I’ve got an EFTPS payment scheduled for April 15. What do I do? The answer tells us that the payment isn’t going to be automatically changed from April 15 to July 15. This is important. They’ll still take the money on April 15. Maybe some of your clients don’t care, just want to get it out of the way. But for those clients who want to wait until July, the IRS gives us the mechanism to either go in and cancel the April 15 scheduled payments. And there’s also a phone number mentioned here on the slide that your client can call to change the scheduled date of that payment. So that’s again, that was a popular question that came up on on Facebook.
Question number 15: Does this relief apply to state tax liabilities? Boy, this was one that’s popped up a lot. Let me tell you, there is no requirement that the states must follow the federal due dates. They typically do. But I’ll put a shout out to my NATP friend Cheryl Morris in Massachusetts, who put a posting on Facebook yesterday that said Massachusetts is not changing their due date from April 15 under the guise that they need the money, and a lot of states are in that situation. Here we are in the state of Illinois. As I know right now, today, Illinois has not chosen to follow the change in the federal due date for the very reason that Massachusetts stated that they need the money and we know Illinois needs the money. NOTE: ILLINOIS HAS NOW FOLLOWED FEDERAL FILING DEADLINES. I will tell you that a couple of other collar states, Missouri and Indiana have both changed following the federal due date. There’s a link that IRS gave us here on this question number 15 slide. You can go to the link at the bottom and see what tax agencies have changed or are changing as we speak. Remember, a very dynamic very fluid situation. And my comments could change in a matter of days. Remember, we’ve got a great big bill, $2 trillion bill, going through Congress right now. We’ve got agreement between Treasury, the President, and the Senate. It’s gotta come to a vote, gotta go to the House. They’ve got to see what the differences are to present something to the President to sign. And again, we’re going to do a webinar based on the amount of tax legislation I believe is contained within this.
Let’s move on Question number 16: The notice postpones the deadline for the first quarter 2020 estimated income tax payment from April 15 to July 15. What does that do to the second quarter estimate payment due on June 15? According to the IRS, the second one is now due before the first one. So if any of you out there are fans of the Star Wars series of movies, you know that four five and six are really one, two and three in terms of when they came out. So we have the same situation here. I know it’s a really tough situation. But this is the way it stands right now, could change tomorrow, but the April 15 quarterly estimate is due July 15. But the second quarter estimate is due June 15. So the second one is still the second one, but The first one is delayed, but not then thereafter. Guys, I can’t make this stuff up. This is the reality of the question.
Let’s go on to question number 17 — another popular one that was out there on Facebook — Does this relief provide me more time to contribute money to my IRA for 2019? Answer? Yes, it makes the filing deadline (remember that was always the due date of the tax return, the unextended due date. So remember, this isn’t an extended due date. This is in fact a change in the due date). IRS says yes, IRA contributions can be made up to July 15 for last year and they will be considered timely. IRS also makes a reference in this slide to Publication 590, which I’m assuming is being updated.
Question number 18: I owe the 10% additional tax amounts includable in gross income. Is the due date for paying that additional tax also changed to July 15? The answer is yes. And I’m going to give you this caveat. I do believe in the big, big bill that’s going through Congress right now, they’re trying to provide some relief from 10% withdrawal penalties. But as it looks right now, we know that that 10% additional tax is an additional tax on a 1040, is it not? So it’s not due April 15. It’s also due July 15.
Question number 19: I put too much money in my workplace retirement plan. Normally I had until April 15 to get that money out. Is that date also changed? IRS says yes, because the due date of the underlying 1040 has been changed. The date to get those excess deferrals out has also been changed to July 15.
Question number 20: For employers with a federal income tax due date of April 15, is the end of the grace period to make contributions to the qualified plans on account of 2019, also July 15? And the answer is yes. Assuming that their due date is July 15. If it’s another due date — take an S corp in the situation or a partnership. They were due March 16. Not April. So that extended date to make the employer contributions to pension plans would be September 15. But this depends on is the filing deadline April 15?
Question number 21. I apologize. I’m going through these really quick but I don’t want you to have to spend too much time on this blog and we’re already over 16 minutes. Does this relief give me more time to put money in an HSA? For 2019? Answer? Yes. So the HSA funding date, like the IRA funding date, was April 15. Since that has been changed, HSAs can be funded for last year, also up to July 15.
Here’s an interesting question number 22: I want to file a claim for refund for 2016. So we’re trying to get in to amend those returns within that three year statute, the window of opportunity, which normally would have been done by April 15. Does this relief give me more time to to file an amended 2016 return? You know what? It says here? The answer’s no. We have to get those done by April 15. So it looks to me like unless IRS changes their mind, those 2016 returns are going to close on April 15. That’s because the filing deadline has only been changed for 2019 returns and think about that. I think that does make sense. Because what is it? It’s three years from the original due date. So the original due date of that ’16 return was April 15 or April 16, whatever it was in 2017. So we go 17–18–19–20 ding ding ding, April 15 2020. That ’16 return is going to fall off. So if you got anybody out there that’s trying to get a refund done for 2016, tey need to get those filed by April the 15th.
Question number 23 (we’re getting down down to the end here) Does the relief postpone the time for filing Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax? I’ve never done this myself, doesn’t mean it’s not out there. The answer from the IRS is no.
Question number 24: I failed to make the required installments of estimated tax in the required amount during 2019. Does this relief apply to the estimated tax penalty for 2019? And the answer is no. If those estimates were late, they were late.
So boy, this is a fluid situation going on out there. Ladies and gentlemen, I apologize if I went through it really fast, but you know, I wanted these blogs to be quick hits for you during tax season. Hopefully you’re out there working just like I am, you’re having clients either drop off their information, you’re not really having face to face appointments because of the sheltering in place or just trying to be safe. And I hope that’s giving you some more time, maybe a little breathing room, during this filing season and also with a being changed to July 15th. I think having these FAQs is very useful from IRS. But stay tuned, we’ve got a lot more information coming out and again, a very dynamic, very fluid situation. And we will do our utmost to remain here for you and to work with you and get you through this together. So for now, this is Tom O’Saben from the University of Illinois Tax School sheltering in place in my office in Maryville, Illinois, saying we’ll say goodbye for just a while.
by Tom O’Saben, EA, University of Illinois Tax School (taxschool.illinois.edu)