The IRS issued Notice 2020-17 that provides relief for any person with a Federal income tax payment due April 15, 2020. The due date for making Federal income tax payments due April 15, 2020, is postponed to July 15, 2020. The maximum amount of the tax due that may be postponed without interest and penalty for all taxpayers other than C corporations is $1 million regardless of filing status. For example, the limit is the same for a single individual and for married individuals filing a joint return. In both instances, the amount of the tax payment that may be deferred until July 15 is limited to $1 million. For C corporations, whether it be a consolidated group or a corporation that does not join in the filing of a consolidated return, the maximum amount of the tax payment that can be deferred until July 15 is $10 million.
The relief that is provided is available solely with respect to Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020 in respect of a taxpayer’s 2019 taxable year, and Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for a taxpayer’s 2020 taxable year. The amounts that can be deferred in the aggregate include all payments that would otherwise be due on April 15. For example, for an individual who has a combined balance (2019 tax and 2020 estimated payment) due of more than $1 million on April 15, the relief would apply only to $1 million. The payments that can be deferred are only in respect to a taxpayer’s 2019 taxable year and 2020 Federal estimated income tax payment due on April 15. The relief does not apply to the payment or deposit of any other type of Federal tax or the filing of any tax return or information return. So, extensions must be filed for tax returns that are due on April 15, absent additional relief to the contrary. The relief does not apply to tax payments due in respect of a taxpayer’s taxable year other than 2019. For example, taxpayers with obligations to make Section 965 installment payments (the 2017 transition tax ) on April 15 must make those payments by April 15.
As a result of the postponement of the due date for making Federal income tax payments up to the maximum amount to July 15, interest, penalties, and additions to tax with respect to the postponed Federal income tax payments will begin to accrue on July 16. In addition, interest, penalties and additions to tax will accrue on April 16 on the amount of any Federal income tax payments in excess of the maximum amounts not paid by on April 15. So, for an individual taxpayer with an amount of $1 million or less due on April 15, interest and penalties will begin to accrue on July 16 if the payments are not made by July 15. For an individual taxpayer with an amount of $1.5 million due on April 15, interest and penalties would begin to accrue on April 16 on $500,000 if not paid by April 15.
To summarize –
- Individuals, Trusts and Estates – due date for the payment of the balance of the 2019 tax due and the first 2020 estimated payment has been extended from April 15 to July 15 for amounts (in the aggregate) of no more than $1 million.
- Corporations – due date for the payment of the balance of the 2019 tax due and the first 2020 estimated payment has been extended from April 15 to July 15 for amounts (in the aggregate) of no more than $10 million.
- Extensions for filing income tax returns must still be filed by April 15, absent further relief from the IRS.
- No interest or penalties will accrue on the allowable deferred payments if the payments are made by July 15. Interest and penalties will start to accrue on July 16 on payments made after July 15.
- Interest and penalties will start to accrue on April 16 for the portion of balances due in excess of the $1 million / $10 million allowable deferred payment amounts on payments made after April 15.
- The deferral of payments until July 15 applies only to 2019 income tax and 2020 estimated payments due on April 15, and not to any other type of tax or deposit (payroll taxes, for example).
A coordinated effort is being made by the AICPA (American Institute of CPAs) and state CPA associations across the country calling on the Treasury Department to add the filing of extensions to the relief provisions. A group of Senators introduced a bill that would extend the due date from April 15 to July 15 for returns required to filed for taxable year 2019. The proposed bill makes no reference to the $1M / $10M thresholds for which the deferred payment relief described above has been granted.
We will provide updates and clarifications as additional guidance is provided by the IRS. If you have questions or concerns, please contact our office at 305.444.0999.