No Automatic Extension for Returns Due on April 15, But Tax Payments Due on That Date Can Be Deferred 90 Days
Following the announcement of planned relief related to April 15 tax filings by the Treasury Secretary over a week ago, the IRS has now formally released the details of such relief in Notice 2020-17.[1]
In the daily session discussing COVID-19 developments given each day by the Vice-President’s task force on March 17, 2020, Treasury Secretary Mnuchin announced that the government was going to allow taxpayers to defer the payment of taxes due on April 15 by 90-days, with a $1 million cap for individuals and a $10 million cap on such deferred payments by corporations. The Secretary did not address whether there would be any automatic extensions also granted for filing income tax returns due on that day, even though the tax potentially would not be required to be paid on that date.
The Notice now gives us many additional details on how the program works. Note that the relief is strictly limited and does not provide an automatic extension of time to file the return in question. As the Notice provides:
The relief provided in this section III 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 an Affected 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 an Affected Taxpayer’s 2020 taxable year. The Applicable Postponed Payment Amounts described in this section III include, in the aggregate, all payments described in the preceding sentence due on April 15, 2020 for such Affected Taxpayers.
No extension is provided in this notice for the payment or deposit of any other type of Federal tax, or for the filing of any tax return or information return.[2]
Note that taxpayers would not be relieved from penalties and interest for, say, delaying payment of payroll tax deposits.
As well, it is important to note the coverage also does not apply to any estimated tax payments except ones due on April 15, 2020. Thus, a calendar year individual taxpayer must still pay the estimated tax payment due on June 15 by that date or face immediate accrual of underpayment of estimated income tax payments on any shortfall. Or, to put it simply, the second federal estimated tax installment for 2020 is effectively due before the first one.
The notice, not surprisingly, defines “Affected Taxpayer” very broadly.
The Secretary has determined that any person with a Federal income tax payment due April 15, 2020, is affected by the COVID-19 emergency for purposes of the relief described in this section III (Affected Taxpayer).[3]
The specifics on the maximum tax due for which relief will be granted is outlined in the Notice as follows:
For an Affected Taxpayer, the due date for making Federal income tax payments due April 15, 2020, in an aggregate amount up to the Applicable Postponed Payment Amount, is postponed to July 15, 2020. The Applicable Postponed Payment Amount is up to $10,000,000 for each consolidated group (as defined in §1.1502-1) or for each C corporation that does not join in filing a consolidated return. For all other Affected Taxpayers, the Applicable Postponed Payment Amount is up to $1,000,000 regardless of filing status. For example, the Applicable Postponed Payment Amount is the same for a single individual and for married individuals filing a joint return. In both instances the Applicable Postponed Payment Amount is up to $1,000,000.[4]
The result of this relief is to suspend the calculation of penalties and interest on qualified payments from April 15, 2020 to July 15, 2020. The Notice indicates:
As a result of the postponement of the due date for making Federal income tax payments up to the Applicable Postponed Payment Amount from April 15, 2020, to July 15, 2020, the period beginning on April 15, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to pay the Federal income taxes postponed by this notice. Interest, penalties, and additions to tax with respect to such postponed Federal income tax payments will begin to accrue on July 16, 2020. In addition, interest, penalties and additions to tax will accrue, without any suspension or deferral, on the amount of any Federal income tax payments in excess of the Applicable Postponed Payment Amount due but not paid by an Affected Taxpayer on April 15, 2020.[5]
Finally, the Notice reminds taxpayers that reasonable cause relief may still be available for some (but not all) penalties not covered by this Notice:
Affected Taxpayers subject to penalties or additions to tax despite the relief granted by this section III may seek reasonable cause relief under section 6651 for a failure to pay tax or seek a waiver to a penalty under section 6654 for a failure by an individual or certain trusts and estates to pay estimated income tax, as applicable. Similar relief with respect to estimated tax payments is not available for corporate taxpayers or tax-exempt organizations under section 6655.[6]