The worldwide outbreak of the Coronavirus has caught everyone off guard and taken the world by storm. Not only has it overloaded the healthcare systems globally and brought cross-border travel to a halt, it has wrecked havoc on the economy both locally and internationally. As the US has become the focal point of the virus as of recently with the most cases of any country in the world, the federal government has responded by passing several laws to combat the economic uncertainty that has resulted from the virus, many of which relate to federal tax planning.
According to IRS Notice 2020-18, both the filing deadline and payment deadline for 2019 federal tax returns are automatically extended until July 15th, 2020. This applies to the following tax return categories:
· Form 1040 Series – Individual Tax Returns
· Form 1041 Series – Trust and Estate Tax Returns
· Form 1065 – Partnership Tax Returns
· Form 1120 – Corporate Tax Returns
In the FAQ released by the IRS that accompanied this notice regarding this deadline extension, the Form 1065/1120-S was not included, but those returns typically have a March 15th filing deadline. Also unclear is if Form 990 for tax-exempt organizations is included in the extension relief. Most states have also extended their filing deadlines as well to be consistent with the IRS.
It should also be noted that the prior notice issued by the IRS provided income tax liability thresholds for individual and corporate taxpayers to be able to extend their payments until July 15th. The most recent announcement from the IRS supersedes the previous announcement regarding the thresholds, so all taxpayers have until July 15th to make their 2019 tax payment interest and penalty free despite the amount of their tax liability.
Additionally, this extension also applies to 2019 IRA and HSA contributions, as well as employer contributions to qualified retirement plans. What isn’t mentioned is that this relief does not apply to federal payroll taxes or international information returns (Form 5471, 8938, 8865, etc), therefore it’s a good idea to file an extension prior to April 15th or June 15th if this particular filing requirements apply to you. This extension also applies to the first quarter payment of estimated taxes for 2020, which is normally due on April 15th, however the second quarter payment which is usually due on June 15th is not extended.
The filing deadline does not apply to the submission of the Foreign Bank Account Report (FBAR on Form 114) with the US Treasury’s Financial Crimes Enforcement Network (FinCEN). But please don’t be alarmed by this, because even though the due date for filing the FBAR with FinCEN is April 15th, FinCEN has been granting US persons with this filing requirement who miss this deadline automatic extensions until October 15th. If you happen to miss the April 15th deadline for the FBAR this year, it’s highly unlikely that you’ll be penalized by FinCEN, as long as you get it filed by October 15th.
The IRS has also relaxed some of their enforcement efforts during this interim period. If you happen to have an outstanding balance with the IRS that you are paying off through an installment agreement, payments due between April 1, 2020 and July 15th, 2020 are suspended. Any outstanding Offers in Compromise will not be closed before July 15th, 2020.
And collection activity has been suspended through July 15th, 2020. This involves
· Liens and levies from Revenue Officers,
· Liens and levies from the Automated Collection System,
· Passport certification to the State Department,
· Assignment of delinquent tax accounts to private debt collection agencies.
The IRS may continue the examination of some tax returns during this period if there is a likelihood that the Taxpayer they are examining has the capacity to start the examination in order to protect the Statute of Limitations from expiring. However, new field, office and correspondence audits are unlikely to begin until after July 15th. IRS Appeals functions will continue as normal.
This is the first part of our outreach regarding Coronavirus tax relief. In our second part, we’ll be explaining some of the benefits in the US tax code that have just been enacted and how you can possibly benefit from them.
Matthew Stevens EA
Global US Tax Plan