The Treasury Department and the IRS finally issued Notice 2020-17 late Wednesday afternoon, providing guidance on how Affected Taxpayers may defer tax payments due to the coronavirus (COVID-19).
Any person (individual, trust, estate, partnership, association, company or corporation per IRC §7701(a)(1)), with a federal income tax payment due on April 15, 2020, is considered an Affected Taxpayer.
The Applicable Postponed Payment Amount is the aggregate of all payments due on April 15, 2020.
Individuals and non-corporate Affected Taxpayers may defer the Applicable Postponed Payment Amount of income and self-employment tax of up to $1,000,000 to July 15, 2020, regardless of filing status*. The same $1,000,000 Applicable Postponed Payment Amount applies to single individuals, married individuals filing a joint return and estates or trusts.
*It is unclear from the notice if the same $1,000,000 will apply to each spouse if they file Married Filing Separately. The plain English interpretation would indicate each spouse would have a $1,000,000 Applicable Postponed Payment Amount available, however it is unlikely that this was the intent. We hope the IRS will provide clarification as practitioners pose this and other questions that arise from the Notice.
Corporate Affected Taxpayers may defer the Applicable Postponed Payment Amount of income tax up to $10,000,000 to July 15, 2020. This Postponed Payment Amount applies to consolidated groups or a C corporation that does not join in filing a consolidated return.
This relief applies to income and self-employment taxes relating to the 2019 tax year and first quarter 2020 estimated income taxes due April 15, 2020.
Notice 2020-17 effectively provides that the period of April 15, 2020, through July 15, 2020, will be disregarded in the calculation of any interest, penalty or addition to tax for failure to pay federal income taxes. Payments originally due on April 15, 2020 that are received after July 15, 2020, will be subject to interest and penalties beginning July 15, 2020, unless further subsequent relief is granted.
THREE IMPORTANT NOTES:
This notice does not extend the due date of returns due April 15, 2020. If additional time is required to complete your 2019 income tax return(s), a request for an extension of time to file (Form 4868 or Form 7004) must be filed. Failure to request an extension of time to file, would result in a penalty for late filing, unless further subsequent relief is granted.
This notice does not extend the due date for second quarter 2020 estimated tax payments due June 15, 2020, unless further subsequent relief is granted.
This blog addresses the recent Federal Notice only. Many states are simultaneously providing, or have already provided, their own relief. We will continue to update our COVID-19 Tax Resource Center in the State and Local Tax Resources section as information becomes available.
If you have any concerns about your tax filings as relates to this Notice, or anything relating to the coronavirus pandemic, e-mail our response team here.