On March 18, 2020, the IRS released guidance in response to U.S. Treasury Secretary Steven Mnuchin’s announcement that the federal income tax payment deadline would be extended. Under IRS Notice 2020-17, the Department of the Treasury and IRS have provided an automatic extension until July 15th for payment of taxes otherwise due on April 15th, up to a per taxpayer maximum of $1 million. A joint return is considered to be one taxpayer for purposes of applying the $1 million maximum. The maximum deferral applies, in the aggregate, to any combination of 2019 income taxes and 2020 first quarter estimated tax payments that would otherwise be due April 15th. Those choosing to exercise the deferred federal tax payment option would not incur any interest, penalty, or additions to tax until July 16, 2020 on amounts that do not exceed the $1 million limitation.
As of this writing, all taxpayers that are unable to file tax returns by April 15th are still required to file a request for an automatic extension. Many states had informally indicated that they would follow the federal lead on any relief positions on the expectation that the IRS would simply grant a blanket extension to all taxpayers. Many states can now be expected to come out with their own separate relief provisions, and a few already have. We are monitoring the state relief developments and will keep our clients apprised.
Although the provision does not extend the due date for the filing of individual income tax returns or any other tax returns that are due on April 15th, a bipartisan group of senators proposed legislation on March 19th requesting that the filing deadline be similarly moved to July 15, 2020 to align with the new payment extension deadline.
The instructions for the federal extension, Form 4868, specify that you must: (1) Properly estimate your 2019 tax liability using the information available to you, and (2) Enter your total tax liability on line 4 of Form 4868. Thus, even if you are entitled to an automatic extension of time to pay, we are still required to properly complete the Form 4868. In addition, for taxpayers that expect to owe more than $1 million, we will need to compute the amount of tax to be paid by April 15th in order to avoid interest and penalties on amounts in excess of the $1 million cap.
Please note that as of now, all 2nd quarter estimates remain unaffected by the changes and are still due by June 15, 2020 (prior to the 1st quarter extension deadline).
In summary, absent further relief from either new legislation or the IRS, we still have a lot of work to do between now and April 15th!
All UE personnel are now working from home and the firm is functioning smoothly. Regardless of whether or not a blanket extension is granted, our team will continue to work diligently to complete our clients’ tax returns in the normal course. Please help us to continue providing timely service by sending us your tax information as it becomes available.
As a reminder, please send all tax information to us electronically. Our offices are closed, so receiving and processing paper documents is a challenge. Documents can be provided by upload to our Client Portal, secure email, or fax. All UE staff members have a dedicated direct fax number. In addition, we can provide a ShareFile link via email that will enable you to easily upload documents securely.
As always, please contact your Untracht Early advisor with any questions on the Federal Income Tax Payment Deadline Extension to July 15, 2020.