Dear Clients, Colleagues, and Friends:
Two posts in two days! The IRS offered some more details and clarification yesterday, March 18th, 2020, so here are more answers to some questions you may have. I have tried to cover the most likely scenarios that my clients will face, but please reach out with any questions regarding specific concerns not noted below.
Again, I continue to triage communications. I am now doing the same with tax filings. I am working diligently to file all returns by April 15th for those who still wish to do so.
Q1: Has the IRS changed the April 15th 2020 tax deadline for tax filings and/or tax payments? Yes and no. In the afternoon of Wednesday, March 18th, the IRS released Notice 2020-17 granting an automatic extension of time to pay federal income taxes due April 15th, 2020 to July 15th, 2020. This extension is available to payment amounts up to $1,000,000 for individuals, estates, and trusts. Be advised that this is an extension of time to pay and not an extension of time to file. To receive an extension of time to file, you will need to file an extension for your federal tax return that is still due April 15th, 2020. For my clients, I can help you with that.
Q2: Will I owe late payment penalties or interest if I don’t pay my 2019 federal taxes until July 15th, 2020? No, so long as the payment isn’t over $1,000,000.
Q3: Will I owe late filing penalties or interest if I don’t file until July 15th, 2020? The clearest way to avoid late filing penalties is to file an extension via Form 4868 for individuals and Form 7004 for trusts and estates. This extends the time to file from April 15th, 2020 to October 15th, 2020 for individuals and September 30th, 2020 for most trusts and estates. Again, for my clients, I can help you with that.
Q4: Do I have until July 15th, 2020 to pay my 2020 1st quarter estimated tax payment without late payment penalty/interest? Probably. The $1,000,000 is an aggregate amount for both 2019 catch up amounts and 2020 1stquarter estimates. If your 2020 1st quarter estimated tax payment would normally be due April 15th, and your payment due plus your 2019 catch up payment is $1,000,000 or less, then there’s no penalty for waiting until July 15th.
Q5: I did not make estimated tax payments for 2019. Will I still owe underestimated tax penalties? Yes. These have not been waived.
Q6: Do I have to make a 2020 2nd quarter estimated tax payment by June 15th, 2020? As of this writing, yes. Which could result in situations where 2nd quarter estimated tax payments could be due before 1st quarter estimated tax payments. I would expect IRS guidance on this, but not anytime soon.
Q7: I am self-employed. Are self-employment taxes covered under “income” taxes for purposes of the July 15thpayment extension? Yes.
Q8: I employ others. Are payroll taxes covered under “income” taxes for purposes of the July 15th payment extension? No. As of this writing, employers have not been provided an extension for depositing federal payroll taxes or filing federal payroll tax returns. There has been discussion of this, but no policy created. Notice 2020-17 is clear that it applies only to income and self-employment taxes.
Q9: I file tax returns in one or more states. How is my state addressing April 15th filings and payments? Every state is different. Some have already announced filing and payment delays. Others may or may not issue timely guidance. If you are a client, we will determine together how to approach outstanding state filings and payments. Note that most states either automatically extend tax returns unfiled by April 15th or accept a federal extension as a state extension. To be clear, this applies to filings and not payments.
Q10: I’m expecting a refund with my 2019 tax return. When should I file my return? As soon as all your information is available barring some other valid reason for extending. In other words, a change in the federal April 15th payment deadline is likely irrelevant to you.
Q11: I’m confused, frustrated, scared and you know a lot about my financial situation. Can we talk? You bet. Email me some good days and times so we can speak soon.
Q12: Where can I go for updates about impacts to taxes? Me or https://www.irs.gov/coronavirus. As always, be careful what you read online that does not come directly from the IRS and/or state taxing authorities. A politician’s promise is not authoritative guidance for your particular situation.
Q13: Picard or Kirk? Picard, for sure.