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Financial Planning Insights

COVID-19 Tax Deferral Relief

By The Chandler & Knowles Team | | 0

Last week, the Internal Revenue Service (IRS) announced that individuals and businesses would be getting a 90-day payment and filing extension. Due to the emergence and spread of COVID-19 in the United States, the Treasury Department and the IRS stated that they are providing special payment relief for individuals and businesses.

irs payment extensionPayment & Filing Extension

The filing deadline for tax returns is now July 15th, 2020. However, taxpayers who are owed a refund are encouraged to file as quickly as possible.

Who is Eligible for Relief?

The payment relief that was announced applies to both individuals as well as businesses. 

  • All federal income tax payments and federal income tax returns that were due April 15, 2020 are now due July 15, 2020. This extension applies to federal income tax payments and income tax returns of all taxpayers, including individuals, trusts, estates, partnerships and corporations.
    • The payment deferral limits from Notice 2020-17 ($1 million for individuals and $10 million for corporations) have been removed. There is now no limitation on the amount of payment that may be postponed.
    • This relief does not apply to the second quarter estimated income tax payments that will be due on June 15, 2020.
  • For purposes of calculating any interest, penalties or addition to tax for failure to file the federal income tax returns or pay the federal income taxes postponed by Notice 2020-18, the period from April 15, 2020 to July 15, 2020, will be disregarded.

Notice 2020-18 only extends the deadlines for federal income taxes. No extension is provided for the payment or deposit of any other type of federal tax, or for the filing of any federal information return. For example, without further guidance, the April 15 deadline is not extended for the following:

  • Form 709: United States Gift (and Generation-Skipping Transfer) Tax Return. Those seeking to extend the deadline to file a federal gift tax return for 2019 must complete and mail IRS Form 8892 (Application for Automatic Extension of Time to File Form 709 and/or Payment of Gift/Generation-Skipping Transfer Tax) by April 15, 2020, or IRS Form 4868 (Application for Automatic Extension of Time to File US Individual Income Tax Return) by April 15, 2020. Form 4868 automatically extends the time to file a gift tax return as well as an income tax return until October 15, 2020.
  • Form 3520: Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. Taxpayers required to file Form 3520 (or a substitute Form 3520-A required if the trustee of the taxpayer’s foreign grantor trust failed to file Form 3520-A by March 15, 2020) may seek an extension by filing IRS Form 4868 to extend their federal income tax return deadline to October 15, 2020, which will automatically extend the due date for IRS Form 3520 (and the substitute Form 3520-A).
  • Form 4868. Taxpayers who want to extend the time for filing their federal income tax returns until October 15, 2020, are not relieved from filing Form 4868. This form must be filed by April 15, 2020, the regular due date of the return. The IRS likely intended to extend the time for filing Form 4868 until July 15, but it is not clear that the Notice accomplishes this.
  • Report of Foreign Bank and Financial Accounts (FBAR). FBARs are due April 15, 2020, but a taxpayer who fails to timely file will automatically receive an extension to October 15, 2020.

In addition, The Texas Comptroller's Office is offering assistance to those businesses that are struggling to pay the full amount of sales taxes they collected in February. Assistance could be in the form of short-term payment agreements and, in most instances, waivers of penalties and interest. For more information, click here.

We understand the uncertainty during this unprecedented time. Our team is here to answer any questions you may have and provide support. Schedule a meeting online or submit all of your information online via our SmartVault.

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