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April 10 update: Expansion of key tax deadlines for individuals and businesses.
April 3 update: Action still needed for information returns and to delay scheduled automatic payments.
March 31 update: Gift tax deadline extended to July 15, 2020.
March 20 update: Tax deadline extended to July 15, 2020.
March 23 update: The Internal Revenue Service issued clarifying guidance regarding the previously announced changes to the upcoming tax deadline.
This article was originally published on March 17, 2020. It will continue to be updated with current tax deadline information as announcements are made.
In response to the current COVID-19 pandemic, the Internal Revenue Service announced a postponement of the upcoming tax deadline that may affect millions of individuals and businesses. In addition to deferring payment of any tax liability, tax forms will also now be automatically extended until July 15 without incurring interest and penalties. The Internal Revenue Service recently released clarifying guidance (Notices 2020-18, 2020-20, and 2020-23) regarding the announced changes to the upcoming tax deadline.
The most recent notice, issued April 9, has an intent to extend just about all tax filings and payments that are due between April 15 and July 15. This automatic extension applies to individuals, trusts, estates, corporations, and other non-corporate tax filers.
In addition to earlier guidance that applied to any individual, trust, estate, partnership, corporation, or gifting event that previously had a tax return deadline of April 15, 2020, this most recent notice expands the types of filers and types of information reports that are now automatically extended until July 15, 2020. Fiscal year filers, estates, not-for-profit organizations, informational filings, and second quarter estimates are also now due July 15.
No interest or penalties will be assessed on payments related to the 2019 taxable year, fiscal year filings, first and second quarter 2020 estimated income tax payments, or almost all filings and payments due between April 15 and July 15. No formal extension forms need to be filed in order to receive this extension.
For anyone who has already filed their tax return and scheduled an automatic payment to be withdrawn from an account on April 15, that payment will not automatically be rescheduled for the new deadline. A taxpayer would need to proactively cancel the original payment and generate a new order for withdrawal for the July 15 due date. See the COVID-19 FAQ section of the IRS website for additional details.
Impact on Information Returns
Previous guidance generated confusion regarding schedules, returns, and other forms that are filed as attachments to filings that had been granted extension. Notice 2020-23 provides explicit clarification that these supporting and informational items have also been extended to July 15.
Informational forms, schedules, and returns that are now extended include:
Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts (which is a separate filing);
Form 5227, Split-Interest Trust Information Return (which is a separate filing);
Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations;
Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business;
Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund;
Form 8858, Information Return of U.S. Persons with Respect to Foreign Disregarded Entities (FDEs) and Foreign Branches (FBs);
Form 8865, Return of U.S. Persons with Respect to Certain Foreign Partnerships;
Form 8938, Statement of Specified Foreign Financial Assets;
Schedule H, Household Employment Tax; and
Schedule SE, Self-Employment Tax.
Reason for Extensions
Whether an individual or a business files a return or utilizes the automatic extension option by July 15, payment of the outstanding tax liability is now not required until that date, and interest and penalties will not be assessed. Normally, full payment is due by April 15.
The intent behind the tax liability payment extension is to help stimulate the American economy, which has already been significantly affected by the COVID-19 pandemic. It will also relieve some pressure on the Treasury Department, which is understaffed as is and whose workforce may face further stress as the pandemic continues. In fact, IRS live telephone assistance is currently unavailable due to the COVID-19 national emergency.
That being said, the earlier you file, the earlier you can expect a refund. According to Treasury Secretary Steven Mnuchin, taxpayer refunds will continue to be processed, and taxpayers are encouraged to still file their return by April 15. According to the IRS FAQ page, most refunds are issued in less than 21 calendar days. With this change to the tax deadline, it’s unknown how quickly refunds will be issued in the future.
Tax Filing Updates for States
If you work outside of Washington state or have investments in other states, you may also be wondering how state governments are handling the upcoming tax filing deadline. Many states have already issued guidance regarding their state deadlines, and others will likely release statements shortly. These changes are not the same across all states, and I would encourage you to contact your tax advisor regarding the most up-to-date guidance for a particular state.
Whether you decide to file a return by April 15 or not, you have until the extended deadline, July 15, 2020, to file your tax forms and make your tax payment without any penalties. To the extent that you have already compiled the tax documents necessary for filing your return, I would encourage you to continue working on preparing your return – or working with your tax preparer, if you have one. You and your tax preparer will both be happier once it’s filed and crossed off the proverbial to-do list, especially if you will be receiving a refund this year.
The situation is evolving daily and there may be further guidance issued on a Federal or state level in the near future. If you have any questions regarding the recommendations, please contact the appropriate advisor. We are in uncharted waters now, so please contact us if you have questions.
Regardless of whether you choose to take advantage of the unique situation we’re in or not, stay healthy out there!
This article or blog contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.