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To be sure, Americans and many small businesses will get federal and state tax relief due to the COVID-19 situation. There are many questions about the specifics. The IRS just issued Notice 2020-17, and it answers some of the questions about federal tax relief. Here’s what we know and don’t know, as this was written.
Deferred federal income tax payment deadline for individuals
Individuals can defer their federal income tax payments (including any self-employment tax) for the 2019 tax year from the normal April 15 deadline until July 15. That means you can put off paying what you still owe for last year until July 15 without incurring any interest or penalties.
IRS Notice 2020-20 confirms that individuals can also defer until July 15 their initial quarterly estimated federal income tax payments for the 2020 tax year (including any self-employment tax) from the normal April 15 deadline until July 15, without incurring any IRS interest charge penalty. (Folks who have non-salary income — self-employeds, investors, rental property owners, and others — must make quarterly estimated payments to avoid the interest charge penalty. You know who you are.)
Individuals can defer up to a combined $1 million of the aforementioned tax payments until July 15. The $1 million ceiling applies equally to unmarried individuals and married joint-filing couples.
Deferred federal income tax payments deadline for corporations
For corporations that use the calendar year for tax purposes, the federal income tax payment deadline for the 2019 tax year is also April 15. Corporations can defer up to $10 million from April 15 until July 15.
The deferral privilege also applies to the initial quarterly estimated federal income tax payment for 2020 that is due on April 15 for corporations that use the calendar year for tax purposes.
More specifically, corporations can defer up to a combined $10 million of the aforementioned tax payments until July 15 with no interest or penalties.
Deferred federal income tax payment deadline trusts and estates
Trusts and estates pay federal income taxes too. Federal income tax payments for the 2019 tax year of a trust or estate that uses the calendar year for tax purposes are also due on April 15.
Ditto for the initial quarterly estimated federal income tax payment for the 2020 tax year of a trust or estate that uses the calendar year for tax purposes that is also due on April 15.
IRS Notice 2020-17 clarifies that trusts and estates can defer up to a combined $1 million of the aforementioned tax payments from April 15 to July 15 with no interest or penalties.
Federal income tax return filing deadlines remain unchanged (so far)
Despite what you may have seen or heard to the contrary, the IRS has not yet announced that the April 15 deadline for filing your 2019 Form 1040 will be automatically extended without you having to take any action. If you have not already filed your 2019 return, you can get an automatic filing deadline extension, to October 15, by filing IRS Form 4868. Your extension request will be automatically approved, but only if you file Form 4868 on or before April 15.
It would be no skin off the government’s nose to simply grant everyone an automatic extension to October 15 without having to take any action. But that has not yet happened. The IRS may have to wait for approval from the Treasury Department to officially announce anything on this issue, and Treasury Secretary Mnuchin’s plate is pretty full right now. I expect we could soon see an IRS announcement that the Form 1040 filing deadline is extended to October 15 with no taxpayer action required. But who knows? I’ve been wrong once or twice before.
Ditto all of the above with regard to extending the April 15 filing deadline for 2019 federal income tax returns (Form 1120) for corporations that use the calendar year for tax purposes.
Ditto all of the above with regard to extending the April 15 filing deadline for 2019 federal income tax returns of trusts and estates (Form 1041) for trusts and estates that use the calendar year for tax purposes.
What about deadlines for other federal tax payments and returns?
What about federal payroll taxes (Social Security and Medicare taxes) owed by employers? According to IRS Notice 2020-17, there’s no official relief so far. But stay tuned for tax relief measures that will be almost certainly be included in the sure-to-be-huge COVID-19 relief legislation that’s in process.
What about federal estate and gift taxes? Under IRS Notice 2020-17, there’s no official relief so far. But stay tuned.
What about delayed return filing deadlines for these other types of federal taxes? Per IRS Notice 2020-17, no official relief so far. But stay tuned.
What about state taxes?
No doubt many if not all states will grant various forms of tax relief, and the relief offered will be all over the map. Literally. Here’s one good site to stay informed.
The bottom line
In the understatement of recent years: stay tuned for further developments.
