UPDATE: On March 23, 2020 the IRS issued Notice 2020-18 to expand (and supersede) the relief provided in Notice 2020-17. Notice 2020-18 provides both an automatic extension of time to file federal income tax returns and pay federal income tax, self-employment tax or estimated tax due on April 15, 2020. The new due date for both is now July 15, 2020. Please see our updated advisory: Update: Due Dates for Income Tax Payments Postponed Due to COVID-19
On March 17, 2020 Secretary of Treasury Mnuchin announced that due to COVID-19 (coronavirus) and its impact on the economy, the government will allow a deferral of tax payments that are due to the IRS by April 15, 2020.
To implement the payment deferral, on March 18, 2020 the IRS issued Notice 2020-17 setting forth payment relief available for taxpayers affected by the ongoing COVID-19 pandemic.
Takeaways from Notice 2020-17
- The IRS has NOT extended the time to file federal income tax returns. Individual income tax returns remain due by April 15, 2020. If you are unable to file by the due date, you should request an extension of time to file using Form 4868.
- The due date for making federal income tax payments that were due on April 15, 2020 has been postponed to July 15, 2020.
- Individuals can postpone payments up to $1 million
- Corporations can postpone payments up to $10 million
- The payment relief applies to:
- Federal income tax payments due on April 15, 2020 for the 2019 tax year
- Federal estimated income tax payments due on April 15, 2020 for the 2020 tax year
- Penalties, additions to tax and interest will NOT apply to postponed payments made by July 15, 2020
- NO extension is provided for the payment or deposit of any other type of federal tax, or for the filing of any tax return or information return
In addition, taxpayers that are assessed penalties or additions to tax despite the relief provided in Notice 2020-17 may seek reasonable cause relief under IRC 6651 for failure to timely pay, or seek waiver under IRC 6654 for failure to pay estimated income tax.
While Notice 2020-17 does provide clarification on payment relief, questions on this program still remain. Varnum’s tax team will provide updates as they evolve.