Man with calculator counting money and checking bills online

The coronavirus pandemic has affected all areas of the country. In response to this crisis, the federal government is instituting changes to the tax payment and tax filing deadline.

Regulations

IRS Issues Guidance on a 90-Day Extension for Tax Payments, Filing

  • Chastity Wilson
  • Chris Hesse
  • John Werlhof
  • 3/22/2020

Update:
This article was originally published on March 19, 2020. It has been updated to reflect information released about the federal income tax filing deadline extension and related guidance.

On Tuesday, March 17, Treasury Secretary Mnuchin announced a 90-day extension for making tax payments, in response to the coronavirus pandemic (COVID-19). On Wednesday, March 18, the IRS released guidance on the extension for tax payments. Concerns about not extending the filing deadline were voiced by tax preparers and lawmakers. Treasury listened to the concerns. In a tweet on Friday, March 20, Mnuchin announced Treasury is moving “Tax Day” from April 15 to July 15. The IRS acted swiftly and released Notice 2020-18, providing guidance on the federal filing and payment extension.

Read on for answers to common questions regarding the federal tax extension.

Who gets a federal extension to file and pay taxes?

Any individual, corporation, trust, estate, or partnership with a federal income tax payment or a federal income tax return due April 15, 2020, will be granted an extension. The extension appears to be limited to returns (and related payments) for the 2019 tax year and estimated tax payments for the 2020 tax year. For example, the extended tax return due date for a C corporation with a fiscal year-end of June 30, 2019, is April 15, 2020. While the return is due April 15, the deadline for the corporation’s return and payment does not appear to be extended because the return is for the 2018 tax year.

How long is the extension?

Taxpayers have until July 15, 2020, to file their federal income tax return and pay any federal income tax liability.

Do taxpayers have to file a form on or before April 15 to get the extension?

No, an extension is not required because the due date has shifted to July 15.

Is there a limitation on the amount of tax payment that can be postponed?

No. Unlike the prior IRS notice that deferred up to $1 million for individuals and $10 million for corporations, there is NO limitation on the amount of tax that can be deferred to July 15.

Is the extension for all federal tax returns and federal tax payments?

The extension only applies to:

  • Federal income tax payments, including self-employment tax;
  • Federal income tax returns for the 2019 taxable year due on April 15, 2020; and
  • Federal estimated income tax payments, including self-employment tax, due on April 15, 2020, for the 2020 taxable year.

Accordingly, the extension does not include other taxes, such as employment, excise, estate, and gift taxes. The extension does, however, apply to income tax payments and income tax returns for estates. The notice does not specifically include excise and payroll taxes submitted with an income tax form. For example, Schedule H is for Household Employment Taxes. It is a payroll tax form, but submitted with the Form 1040. We expect that the July 15 due date applies for this tax. We expect that the July 15 date applies for the Net Investment Income Tax (NIIT) as well.

Gift tax returns for the 2019 calendar year are due April 15, 2020. A separate gift tax return extension should be filed if Form 709 is not filed by April 15, 2020.

Will the extension of time to pay taxes and file the return be subject to penalties or interest?

No, neither penalties nor interest will apply as long as the tax is paid and the return is filed (or extended) by July 15.

Are state tax filing and payment obligations also extended?

This is up to each individual state. Some states have already provided extensions. Some states have not yet granted extensions, but they may do so in the near future.

Does the extension apply to payments or returns due in May or June?

The extension does not apply to payments or returns due in May or June.

Does the extension apply to second quarter estimated tax payments due June 15?

The IRS notice says the extension applies to estimated tax payments due on April 15, 2020. Without further guidance, second quarter estimated income tax payments due on June 15, 2020, do not get an extension to
July 15.

If we apply for an extension at July 15, 2020, will that extend the return to October 15, 2020 or January 15, 2021 (six months)?

We don’t know. A six-month extension is not mandatory; the granting of an extension is within the discretion of the IRS, but cannot exceed six months. Further guidance from the IRS is expected.

If you expect a refund, you should continue to work with your tax advisor to determine your tax liability so you can get a refund as soon as possible. If you are expecting a tax liability, work with your tax advisor to determine your tax liability so you can manage your cash flow.

How we can help

CLA professionals are available to help you navigate these uncertain times.

Contact Us

  • Chastity Wilson
  • Managing Principal of Tax
  • CLA Orlando