WHAT are the Changes and Whom Does it Impact?
As an Enrolled Agent, a federally licensed tax expert, Certified Tax Planner and a Certified Tax Coach, Lynn believes in keeping taxpayers informed with the most updated information available. Please review the information that has been provided and call our office at 863-295-9895 if you have questions or need professional assistance with tax planning or any IRS or other tax matters.
It’s scary out there right now. We are living in unprecedented times. Over the last week or so, new tax laws and updates are coming out every day; sometimes more than once in a day. Tax dates are changing, due dates for payments are changing and taxpayers are getting information from a variety of sources, not all of which are accurate and many folks are confused. I have personally spent hours each day reading tax updates from the US Treasury Department, the Internal Revenue Service as well as a variety of resources available to me as a tax professional. It’s no wonder taxpayers are confused!
The IRS has recently published Notice 2020-18 (PDF), along with the Treasury Department they have announced special Federal income tax return filing and payment relief in response to the ongoing Coronavirus Disease 2019 (COVID-19) emergency. Below are answers to frequently asked questions related to the relief provided in the Notice. These questions and answers will be updated periodically by the IRS and are designed to be a flexible tool to communicate information to taxpayers and tax professionals in this changing environment. The answers to these questions provide responses to general inquiries and are not citable as legal authority. Accordingly, the Treasury Department and the IRS are continuing to consider additional IRB guidance on these issues addressed in these FAQs.
I am providing an excerpt of the above mentioned bulleting and highlighting the questions I am hearing most from the taxpayers I have spoken to over the last several days.
- A1. Any person with a Federal income tax return or payment due on April 15, 2020, is eligible for relief under the Notice. “Person” includes any type of taxpayer, such as an individual, a trust, an estate, a corporation, or any type of unincorporated business entity. The payment due refers to both 2019 Federal income tax payments (including payments of tax on self-employment income) and 2020 estimated Federal income tax payments (including payments of tax on self-employment income), regardless of the amount owed. The return or payment must be due on April 15, 2020 – this relief does not apply to Federal income tax returns and payments due on any other date.
- A2. No, you do not have to be sick, or quarantined, or have any other impact from COVID-19 to qualify for relief. You only need to have a Federal income tax return or payment due on April 15, 2020, as described above.
- A3. The Notice postpones the filing and payment of Federal income taxes reported on the following forms:
- Form 1040, 1040-SR, 1040-NR, 1040-NR-EZ, 1040-PR, 1040-SS
- Form 1041, 1041-N, 1041-QFT
- Form 1120, 1120-C, 1120-F, 1120-FSC, 1120-H, 1120-L, 1120-ND, 1120-PC, 1120-POL, 1120-REIT, 1120-RIC, 1120-SF
- Form 8960
- Form 8991
- With respect to Form 990-T, if that Form is due to be filed on April 15, then it has been postponed to July 15 under the Notice. For taxpayers whose Form 990-T is due on May 15, that due date has not been postponed under the Notice.
- With respect to returns due on March 16, 2020, which include Form 1065, Form 1065-B, Form 1066, and Form 1120-S for calendar year taxpayers, the filing of those returns has not been postponed.
- A4. No, any taxpayers who have filing or payment due dates other than April 15 have not been granted relief at this time.
- A5. No, under the Notice, normal filing, payment, and deposit due dates continue to apply to both payroll and excise taxes.
- A6. No, normal filing and payment due dates continue to apply to estate and gift taxes.
- A7. Yes, the relief applies to section 965 installment payments due on April 15, 2020. Although the section 965(h) installment payment is generally made in respect of a taxpayer’s 2017 or 2018 tax year, under section 965(h)(2), the due date of the installment payment associated with a 2019 tax return is the due date of the taxpayer’s 2019 Federal income tax return. For any taxpayer whose Federal income tax return filing due date has been postponed from April 15 to July 15, 2020, the due date of that taxpayer’s section 965 installment payment has also been postponed to July 15, 2020.
- A8. No, the relief only applies to the filing of Federal income tax returns due on April 15, 2020.
Filing and Paying Your 2019 Federal Income Taxes and Your First Quarter 2020 Federal Estimated Income Taxes
- A9. Nothing, except file and pay any tax due with your return by July 15. You don’t need to file any additional forms or call the IRS to qualify for this automatic Federal tax filing and payment relief. If you expect a refund, you are encouraged to file your return as soon as you can so that you can receive your refund. Filing electronically with direct deposit is the quickest way to get refunds. If you need more time beyond July 15 to file your return, request an automatic extension of time to file as described next.
- A10. If you are an individual, you can request an automatic extension to file your Federal income tax return if you can’t file by the July 15 deadline. The easiest and fastest way to request a filing extension is to electronically file Form 4868 through your tax professional.
- You must request the automatic extension by July 15, 2020. If you properly estimate your 2019 tax liability using the information available to you and file an extension form by July 15, 2020, your tax return will be due on October 15, 2020. To avoid interest and penalties when filing your tax return after July 15, 2020, pay the tax you estimate as due with your extension request.
- A11. To avoid interest and penalties, pay your taxes in full by July 15, 2020. If you filed Form 1040 or Form 1040- SR, the tax payment amount can be found on line 23. If you filed Form 1040-NR, the tax payment amount can be found on line 75. For a corporation filing a Form 1120, the tax payment amount can be found on line 35.
- Interest and penalties will begin to be charged after July 15 for any amount remaining unpaid by that date.
Q12. I already filed my 2019 income tax return that would have been due on April 15 and scheduled a payment of taxes for April 15, 2020. Will this payment be automatically rescheduled to July 15, 2020?
- A12. No, the payment will not be automatically rescheduled to July 15. If you do nothing, the payment will be made on the date you chose. Here is information on how to cancel and reschedule your payment:
- If you scheduled a payment through IRS Direct Pay, you can use your confirmation number from the payment to access the Look Up a Payment You can modify or cancel a scheduled payment until two business days before the payment date. The email notification you received when you scheduled the payment will contain the confirmation number.
- If you scheduled a payment through Electronic Federal Tax Payment System (EFTPS), click on Payments from the EFTPS home page, login, then click Cancel a Tax Payment from the left menu and follow the instructions. You must do so at least two business days before the scheduled payment date.
- If you scheduled a payment as part of filing your tax return (authorizing an electronic funds withdrawal), you may revoke (cancel) your payment by contacting the U.S. Treasury Financial Agent at888-353-4537. You must call to make a payment cancellation request no later than 11:59 p.m. ET two business days prior to the scheduled payment date.
- If you scheduled a payment by credit card or debit card, contact the card processor to cancel the card payment
Be careful – this is where taxpayer can have problems. The Federal changes have NOT been uniformly followed by the States. You are encouraged to contact your State or Non-Resident State (if you are required to file) or contact your tax professional. Getting this wrong can cost you penalties and interest!
- A13. No, this relief applies only to Federal income tax payments. State filing and payment deadlines vary and are not always the same as the Federal filing and payment deadline. We urge you to check with your state tax agencies for those details. More information is available at https://www.taxadmin.org/state-tax-agencies.
Q14. The Notice postpones the deadline for first quarter 2020 estimated income tax payments due on April 15, 2020. What about second quarter estimated tax payments due on June 15? Have they been postponed as well?
Be careful when making your payments. Again, unprecedented times, which coupon will you send in first? How will IRS apply your payments if you are NOT specific when making your payments?
Only time will tell! A seasoned tax professional can make sure you get this correct!
- A14. No, second quarter 2020 estimated income tax payments are still due on June 15, 2020. First quarter 2020 estimated income tax payments are postponed from April 15 to July 15, 2020.
Individual Retirement Accounts (IRAs) and Workplace-Based Retirement Plans
- A15. Yes. Contributions can be made to your IRA, for a particular year, at any time during the year or by the due date for filing your return for that year. Because the due date for filing Federal income tax returns has been postponed to July 15, the deadline for making contributions to your IRA for 2019 is also extended to July 15, 2020. For more details on IRA contributions, see Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).
Q16. If I owe the 10% additional tax on amounts includible in gross income from a distribution that I took from my IRA or workplace-based retirement plan in 2019, is the due date for paying that additional tax also extended to July 15, 2020 on account of this relief?
- A16. Yes, because the 10% additional tax is calculated, reported, and paid at the same time as the income tax owed on the amounts includible in gross income on the distribution, the reporting and payment of the 10% additional tax also has been extended to July 15, 2020 as a result of this relief.
Q17. For employers with a federal income tax return due date of April 15, 2020, is the end of the grace period under section 404(a)(6) to make contributions to their qualified retirement plans on account of 2019 also July 15, 2020 as a result of this relief?
- A17. Yes, because these employers are Affected Taxpayers under Notice 2020-18 for whom the due date for filing Federal income tax returns and making Federal income tax payments that would be due April 15, 2020, is now July 15, 2020, the end of the grace period for these employers is also July 15, 2020 under this relief. So, for example, if an employer is a corporation with an April 15, 2020 due date for filing the Form 1120, then the grace period under section 404(a)(6) for the employer to make contributions to its workplace-based retirement plan that are treated as made on account of 2019 ends on July 15, 2020.
Health Savings Accounts (HSAs) and Archer Medical Savings Accounts (MSAs)
- A18. Yes. Contributions may be made to your HSA or Archer MSA, for a particular year, at any time during the year or by the due date for filing your return for that year. Because the due date for filing Federal income tax returns is now July 15, 2020, under this relief, you may make contributions to your HSA or Archer MSA for 2019 at any time up to July 15, 2020. For more details on HSA or Archer MSA contributions, see Publication 969, Health Savings Accounts and other Tax-Favored Health Plans.
- A19. No, the relief provided for filing Federal income tax returns applies only to Federal income tax returns for the 2019 taxable year. The Notice does not extend relief to any filings or payments for taxable year 2016.
A20. No, the relief does not change the estimated tax requirements or estimated tax penalty for 2019. Relief from the penalty may be available under the normal rules. See Form 2220 (for corporations) and the instructions for either form for details.
There’s enough scary stuff out there right now to worry about. It’s a time to focus on family, caring for those in need and rebuilding our communities once the threat of spreading this illness has subsided. Now is NOT the time to “guess” regarding such important matters as your taxes! Seek professional assistance if you have any questions or concerns regarding tax matters.
A seasoned tax professional should be up-to-date with the most recent information available – and it will be information that is documented and not just “someone’s opinion”! Wouldn’t you rather focus on knowing you are getting it right so that’s one less issue to deal with during these difficult times?
A professional review of each situation can and should be the first course of action.
As an Enrolled Agent (America’s Tax Experts), Certified Tax Planner and a Certified Tax Coach, it’s my job to take a proactive approach with clients by performing a comprehensive and expert analysis of their tax situation and utilizing the current tax code to uncover opportunities which could potentially empower them to have a positive impact on future tax outcomes. In depth planning is not something that can be done “after- the-fact” during tax season; that is to say – simply reviewing history. My job is to help you “write history”. I hope that the information provided to you encourages YOU to be proactive and inspire you to reduce your tax burden! We love tax questions and look forward to sharing our knowledge and expertise with those that want to help themselves.
Don’t let the rules and regulations become your tax nightmare! If you have questions on the above material, or would like to schedule an appointment to review how you may take advantage of the many tax-saving strategies and opportunities which are available, call me today! I will be glad to schedule your personalized tax planning session.
If you found this article useful, please do not keep it a secret. Share it with friend, relative, fellow business owner, or someone else you care about. Remember, friends don’t let friends OVERPAY THEIR TAXES! I ask Better Questions – I provide Better Strategies!
Lynn A. Schmidt, EA, CTP, CTC, CFS, CSA, ARA
Enrolled Agent, Certified Tax Planner, Certified Tax Coach Financial & Tax Strategist