PILLA TALKS TAXES - Featured Article
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IRS GRANTS MORE FILING AND PAYMENT RELIEF
Important Updates to Last Month’s Newsletter
In the March 2020 issue of PTT, I featured an article entitled, “Sorting Out the Tax Filing and Payment Deadlines.” In it I addressed at length the IRS’s notice dated March 20, 2020, which is Notice 2020-18. That notice explains that the IRS extended filing and payment deadlines for personal income taxes. There were limits to the extensions, as explained in that article.
On April 9, 2020, the Treasury issued another order expanding the return filing and the tax payment deadlines, along with other deadlines. That notice is IRS Notice 2020-23, April 9, 2020. I address here the combined effect of both notices.
The Filing and Payment Extensions per Notices 2020-18 and 2020-23
The tax return filing and tax payment extension to July 15, 2020 is expanded. Per Notice 2020-23, the automatic extension (no application or communication with the IRS is required) applies to all of the following:
· Form 1040 – personal income tax
· Form 1120 – corporate income tax
· Form 1065 – partnership income tax
· Form 1041 – estate and trust income tax
· Forms 706 and 709 – estate and gift tax returns
· Form 8971 – Information regarding beneficiaries
· Form 990-T – Excise taxes on exempt organization business income
· Form 990-PF – Return of private foundation
· Form 990-W – ES payments on exempt organization business income
· Estate tax payments
· Excise tax payments on private foundation
· Estimated (ES) payments for individuals on Form 1040
· ES payments on self-employment income
· ES payments for estates and trusts
· ES payments for corporations
Notice 2020-23 is clear that all existing extension procedures still apply. That is to say, Form 4868 provides an automatic extension of six months to file Form 1040. In my March article, I maintained that the 4868 filing extension gets six months from the newly prescribed date (July 15) in which to file the return. That would push the extended filing date to January 15, 2021.
This position is supported by the plain language of Treasury Regulation §1.6081-4(a). This is the authority for a filing extension. It allows for a six-month extension from “the date prescribed for filing the return.” The regulation does not state or use April 15 as the starting point of the six-month extension. Rather, it refers only to the “date prescribed” for filing. Given the president’s disaster declaration, the “prescribed date” is now July 15. The six-month extension pushes the filing date to January 15, 2021.
However correct I might be in this analysis (which is quite simple), the IRS takes a different view. The IRS states unequivocally in Notice 2020-23, §III.B, that the extended filing date per Form 4868 is October 15, 2020. The IRS cites no legal authority for its position. Notice 2020-23 is also clear (and correctly so) that Form 4868 does not extend the time for paying the taxes. Under the relief authorized by the IRS in Notices 2020-18 and 2020-23, the deadline for paying the tax is July 15, 2020.
However, true to its historical pattern, the IRS does not say one word about the payment extension available by filing Form 1127, Application for Extension of Time to Pay, which extension is available by operation of code §6161(a). The IRS has lied about this fact for all of the 40-plus years I’ve been in this business and they continue to do. See the March issue for a full analysis of the right to request a filing extension.
So the question is, does a Form 4868 filing extension get you to October 15 (as maintained by the IRS) to file the return, or does Treasury Regulation §1.6081-4(a) apply to get you to January 15, 2021?
I believe the regulation is plain and simple, and I believe the IRS is simply wrong. But as a wise man once said, “Why take the chance?” All failure to file penalties are avoided by simply filing the return by July 15, or if extended by Form 4868, by October 15.
That said, if you cannot pay by then, you must follow the procedures I lay out in the March issue.
The Filing and Payment Options at a Glance
The key differences between the policies expressed in IRS Notices 2020-18 and 2020-23, and the IRS’s longstanding filing and payment extension rules, are explained below.
· The filing deadline for all income tax returns is automatically extended to July 15, and no application is necessary;
· A further filing extension is available by submitting Form 4868 by the July 15 deadline; pushes deadline to October 15;
· Businesses can use Form 7004 to get more time to file beyond the July 15 deadline;
· The tax payment deadline is automatically extended to July 15; no application is necessary and no cap on the amount of tax owed applies;
· A further extension is available by submitting Form 1127 by the July 15 deadline, but Notices 2020-18 and 2020-23 are silent on this extension;
· Interest and penalties are automatically waived through July 15;
· Penalties for failure to file and failure to pay are waived at least through October 15 if Form 4868 is timely filed, and if the IRS grants additional time to pay per a timely filed Form 1127;
· Interest (but not penalties) applies to taxes not paid by July 15, even if additional time is granted per Form 1127;
· You lose the option for the additional filing and payment options if you don’t file Form 4868 (or Form 7004 for businesses), or Form 1127 on or before July 15; and
· The payment extension applies to estimated payments due by self-employed persons.
Note that Notice 2020-18 covers only federal income tax return filings and tax payments, including self-employment tax payments and estimated payments owed by self-employed persons up to July 15. Notice 2020-23 covers corporation, partnership and other returns per the above list.
The above is a part of an article from the April-May 2020 issue of Pilla Talks Taxes Newsletter. Subscribers to Pilla Talks Taxes are able to read complete articles as well as the rest of the newsletter when they log into their subscription account on their non mobile device. https://taxhelponline.com/subscriber-login.html
For more on how extending your filing and payment options on your 2019 taxes, check out my video:
URGENT! IRS EXTENDS APRIL 15th DEADLINE!
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ARTICLES FOUND IN THE LATESTPILLA TALKS TAXES ISSUES:April - May 2020
UNDERSTANDING THE CORONAVIRUS AID, IRS GRANTS MORE FILING AND PAYMENT RELIEF |
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