When the IRS confirmed the deferral of the April 15, 2020 tax deadline to July 15, 2020, many questions arose. Is it for businesses or individuals? What about the self-employed, trusts, IRA contributions or payroll taxes? How does this affect state tax liability? And that is just a few.
In response to the need for taxpayer clarification, the IRS published a list of questions and answers regarding Notice 2020-18 which provides tax filing and payment relief due to COVID-19. We have summarized a few of the most asked questions below. Please refer to the IRS website for the full list of Q&As as they will be updated periodically.
Q1. Who is eligible for the 90-day relief?
A1. Any person with a Federal income tax return or payment due on April 15, 2020, is eligible for relief under the Notice. “Person” includes any type of taxpayer, such as an individual, a trust, an estate, a corporation, or any type of unincorporated business entity.
The payment due refers to both 2019 Federal income tax payments (including payments of tax on self-employment income) and 2020 estimated Federal income tax payments (including payments of tax on self-employment income), regardless of the amount owed. The return or payment must be due on April 15, 2020 – this relief does not apply to Federal income tax returns and payments due on any other date.
Q2. Do I have to actually be sick, or quarantined, or have any other impact from COVID-19 to qualify for payment relief?
A2. No, you do not have to be sick, or quarantined, or have any other impact from COVID-19 to qualify for relief. You only need to have a Federal income tax return or payment due on April 15, 2020, as described above.
Q3. Does the relief apply to payroll or excise taxes?
A3. No, under the Notice, normal filing, payment, and deposit due dates continue to apply to both payroll and excise taxes.
Q4. Does the relief apply to estate and gift taxes?
A4. No, normal filing and payment due dates continue to apply to estate and gift taxes.
Q5. I haven’t filed my 2019 income tax return that would have been due on April 15 yet, but I expect to file it by July 15. What do I need to do?
A5. Nothing, except file and pay any tax due with your return by July 15. You don’t need to file any additional forms or call the IRS to qualify for this automatic Federal tax filing and payment relief. If you expect a refund, you are encouraged to file your return as soon as you can so that you can receive your refund. Filing electronically with direct deposit is the quickest way to get refunds. If you need more time beyond July 15 to file your return, request an automatic 3-month filing extension (Q6).
Q6. What if I am unable to file my 2019 income tax return that would have been due on April 15 by July 15, 2020?
A6. If you are an individual, you can request an automatic extension to file your Federal income tax return if you can’t file by the July 15 deadline. The easiest and fastest way to request a filing extension is to electronically file Form 4868 through your tax professional, tax software, or using the Free File link on IRS.gov. Businesses, including trusts, must file Form 7004.
You must request the automatic extension by July 15, 2020. If you properly estimate your 2019 tax liability using the information available to you and file an extension form by July 15, 2020, your tax return will be due on October 15, 2020. To avoid interest and penalties when filing your tax return after July 15, 2020, pay the tax you estimate as due with your extension request.
Q7. I already filed my 2019 income tax return that would have been due on April 15 and I owe taxes, but I haven’t paid yet. What do I need to do to avoid interest and penalties?
A7. To avoid interest and penalties, pay your taxes in full by July 15, 2020. If you filed Form 1040 or Form 1040-SR, the tax payment amount can be found on line 23. If you filed Form 1040-NR, the tax payment amount can be found on line 75. For a corporation filing a Form 1120, the tax payment amount can be found on line 35.
Interest and penalties will begin to be charged after July 15 for any amount remaining unpaid by that date.
Q8. I already filed my 2019 income tax return that would have been due on April 15 and scheduled a payment of taxes for April 15, 2020. Will this payment be automatically rescheduled to July 15, 2020?
A8. No, the payment will not be automatically rescheduled to July 15. If you do nothing, the payment will be made on the date you chose.
Here is information on how to cancel and reschedule your payment:
Q9. Does this relief apply to state tax liabilities?
A9. No, this relief applies only to Federal income tax payments. State filing and payment deadlines vary and are not always the same as the Federal filing and payment deadline. We urge you to check with your state tax agencies for those details. More information is available at https://www.taxadmin.org/state-tax-agencies or this AICPA state relief summary chart.
Q10. This relief postpones the deadline for first quarter 2020 estimated income tax payments due on April 15, 2020. What about second quarter estimated tax payments due on June 15? Have they been postponed as well?
A10. No, second quarter 2020 estimated income tax payments are still due on June 15, 2020. First quarter 2020 estimated income tax payments are postponed from April 15 to July 15, 2020.
Q11. Does this relief provide me more time to contribute money to my IRA for 2019?
A11. Yes. Contributions can be made to your IRA, for a particular year, at any time during the year or by the due date for filing your return for that year. Because the due date for filing Federal income tax returns has been postponed to July 15, the deadline for making contributions to your IRA for 2019 is also extended to July 15, 2020.
Q12. For employers with a federal income tax return due date of April 15, 2020, is the end of the grace period under section 404(a)(6) to make contributions to their qualified retirement plans on account of 2019 also July 15, 2020 as a result of this relief?
A12. Yes, because these employers are Affected Taxpayers under Notice 2020-18 for whom the due date for filing Federal income tax returns and making Federal income tax payments that would be due April 15, 2020, is now July 15, 2020, the end of the grace period for these employers is also July 15, 2020 under this relief. So, for example, if an employer is a corporation with an April 15, 2020 due date for filing the Form 1120, then the grace period under section 404(a)(6) for the employer to make contributions to its workplace-based retirement plan that are treated as made on account of 2019 ends on July 15, 2020
Q13. Does this relief provide me more time to contribute money to my HSA or Archer MSA for 2019?
A13. Yes. Contributions may be made to your HSA or Archer MSA, for a particular year, at any time during the year or by the due date for filing your return for that year. Because the due date for filing Federal income tax returns is now July 15, 2020, under this relief, you may make contributions to your HSA or Archer MSA for 2019 at any time up to July 15, 2020.
Empowering business owners and individuals in South Jersey and Philadelphia to feel confident through proactive accounting and advisory solutions.