NOTE: This post was published before the IRS release of Notice 2020-23. VIEW THE UPDATED ARTICLE HERE.
If the last month has felt like an episode of the Twilight Zone for you, let me tell you that you are not alone. We are certainly navigating through uncharted waters here. And with things changing by the hour and news articles coming out by the minute, it’s hard to know exactly what the hell is going on.
During these moments of unprecedented changes, please do me a favor and keep one thing in mind: social media posts and tweets are not law. So, while it’s hard not to jump on the bandwagon of speculation, it’s important not to make rash decisions without proper guidance from the authorities. And when it comes to your taxes, the IRS is the authority.
This article is going to go over the recent legislation surrounding due dates and changes for the 2020 tax filing season. Meaning your 2019 Tax Returns. As a mom, I do like to proclaim myself from time to time as a mind reader. And so I will attempt to go over what I think will be the most common questions you may have as it relates to the filing of your tax returns this year.
IRS Notice 2020-18 and What It Means to You
IRS Notice 2020-18 is the official guidance from the IRS issued in relation to the Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic and it expands on and supersedes IRS Notice 2020-17.
OK cool. But what does that mean and why do you care? Well, it outlines the definition of “Affected Taxpayer” and clarifies the due dates for tax returns and payments originally due 04/15/2020. Let’s dive in.
“Affected Taxpayer”
The Secretary of the Treasury has determined that any person with a Federal income tax payment or Federal income tax return due 04/15/2020, is affected by the COVID-19 emergency. Notice the term “income tax”. We’ll get to that in a second.
So, what is the definition of a “person”? You might think it just means well, a person. But section 7701(a)(1) of the Internal Revenue Code defines a “person” to include an individual, a trust, estate, partnership, association, company or corporation.
As such, what we’re really saying here is that if you have an “income tax return or payment” due 04/15/2020, your income tax return or payment due date has been postponed. Has it been extended? No, it has not. It has been postponed.
Now, let’s get into some questions you may have.
What types of income tax returns and payments are normally due 04/15/2020?
Form 1040 Individual Income Tax Return and any payment due with that return.
Form 1120 U.S. Corporation Income Tax Return and any payment due with that return.
Please note that form 1120 is different from form 1120S. If your business has elected S-Corp status and files a Form 1120S, it was due on 03/16/2020. That due date was not extended. If you have not filed your 1120S return, you are advised to do so as soon as possible as penalties are already starting to accrue if you did not request an extension via Form 7004.
Do I need to file an extension to get the new due date?
Nope. There is no need to file an extension via Form 4868 (Individual) or 7004 (Corporate) in order to take advantage of the postponed due date.
Will I be charged any interest or penalties for not paying my tax due by 04/15/2020?
Again, no. Interest, penalties and additions to tax with respect to such postponed Federal income tax filings and payments will begin to accrue on 07/16/2020 if you have not filed and paid by 07/15/2020.
What about Estimated Payments?
Well, first Quarter 2020 Estimated Tax Payments would also normally be due 04/15/2020. So those have been postponed until 07/15/2020. However, only those returns and payments due 04/15/2020 have been postponed. So that means your Second Quarter 2020 Estimated Payment is actually due 06/15/2020, a full month before your First Quarter Payment. To recap, as of the date of this writing your 2020 Estimated Payments are due on the following dates:
1st Quarter due 07/15/2020
2nd Quarter due 06/15/2020
3rd Quarter due 09/15/2020
4th Quarter due 12/15/2020 for corporations and 01/15/2021 for individuals
What types of returns are not included in the postponed due date?
Returns that were due 03/16/2020 are NOT included. Those are: Form 1065 Partnerships, Form 1120S S-Corps, Form 1065-B and Form 1066.
Returns due 05/15/2020 are NOT included.
Payroll and Excise Tax returns are NOT included.
Estate and Gift Tax returns are NOT included.
Expat returns for citizens outside the US due on 06/15/2020 are NOT included.
If I choose to file an extension on my return because I need more time, what will my new due date be?
Filing form 4868 (individual) or form 7004 (corporation) for an extension of time will grant you until 10/15/2020 and must be filed no later than 07/15/2020. Remember, however, this does NOT grant you an extension of time to pay. Only an extension of time to file. If payment due is not received in full by the IRS no later than 07/15/2020, penalties and interest will begin to accrue on 07/16/2020.
I’ve already scheduled my payment to come out of my account on 04/15/2020. Can I cancel that or will it be postponed to 07/15/2020?
Yes, you may cancel it. No, it will not automatically be postponed.
- If you scheduled a payment through IRS Direct Pay, you can use your confirmation number from the payment to access the “Look Up a Payment” feature. You can modify or cancel a scheduled payment until two business days before the payment date. The email notification you received when you scheduled the payment will contain the confirmation number.
- If you scheduled a payment through Electronic Federal Tax Payment System (EFTPS), click on Payments from the EFTPS home page, log in, then click “Cancel a Tax Payment” from the left menu and follow the instructions. You must do so at least two business days before the scheduled payment date.
- If you scheduled a payment as part of filing your tax return (authorizing an electronic funds withdrawal), you may revoke (cancel) your payment by contacting the U.S. Treasury Financial Agent at 888-353-4537. You must call to make a payment cancellation request no later than 11:59 p.m. ET two business days prior to the scheduled payment date.
- If you scheduled a payment by credit card or debit card, contact the card processor to cancel the card.
What about my state return?
Well, that’s a good question. Just because the Federal deadline has been postponed does NOT mean that the states you are required to file in have conformed completely. For up to date information on state return and payment due dates, you can visit these two sites.
- AICPA: https://www.aicpa.org/content/dam/aicpa/advocacy/tax/downloadabledocuments/coronavirus-state-filing-relief.pdf
- Drake Tax Software: https://www.drakesoftware.com/archive/did-covid-19-change-my-state-individual-income-tax-deadline/
What about contributions to my IRA, HSA and MSA?
You can make up your 2019 contributions until 07/15/2020.
Statute of Limitations on Refunds
If you were planning to file or amend a return for Tax Year 2016 in order to claim a refund, please note that the Statute of Limitations has not been extended/postponed and those must be filed by 04/15/2020.
I hope I have been able to answer your questions regarding the new due dates and what that means for you and your clients.
