As part of the federal government’s efforts to soften the economic effects from the Covid-19 pandemic, on Wednesday the IRS issued Notice 2020-17 announcing that federal income tax payments for the 2019 tax year otherwise due on April 15th may be postponed until July 15th 2020 without incurring interest or penalties on the amount due. In addition, the Notice also postponed to July 15th the due date for quarterly estimated federal income tax payments otherwise due on April 15th. Earlier statements by government officials had not indicated that the due date for quarterly estimated tax payments would also be extended.
This morning Treasury further announced that it will also extend the April 15th filing deadline to July 15th. (The Notice had extended the payment deadline but not the filing deadline.) This announcement comes after concerns were voiced by tax return preparers that restrictions imposed to combat the spread of COVID-19 would make it difficult for all filers to meet the April 15th filing deadline. Taxpayers, including those anticipating a refund, are permitted to file a return before July 15th.
For now, the postponement for the payment of taxes is limited to tax payments up to $1,000,000 for individuals and non-corporate taxpayers and up to $10,000,000 for corporate taxpayers. This ceiling applies on a return-by-return basis, so couples filing a joint return are entitled to a maximum postponement of $1,000,000 in taxes otherwise due, and multiple corporations filing a single consolidated return are subject to the $10,000,000 ceiling. Presumably taxpayers who reach the threshold will need to make payments by April 15th of amounts due in excess of the threshold.
The postponement applies only to federal income taxes (and related self-employment taxes) that are otherwise due on April 15th, and is not a blanket 90-day extension on all income tax payments.
This federal relief will not automatically extend to all state income tax filings and payments, and taxpayers will need to look to individual states to grant relief. As of March 19, 2020:
- California has extended both the payment and filing deadlines that occur March 15, 2020 through June 15, 2020 (g., partnership tax returns, individual tax returns, and estimated payments) to July 15, 2020, and is waiving any interest and late payment or late filing penalties that would otherwise apply.
- The Virginia Department of Taxation has extended the due date of payment of individual and corporate income taxes to June 1, 2020. Virginia has not yet extended the filing deadlines, and has indicated that interest (but not penalties) will continue to accrue if taxes are not paid by the original deadline.
- None of the District of Columbia Office of Tax and Revenue, Illinois Department of Revenue or the New York State Tax Department have extended filing or payment deadlines for income tax returns, and the Texas Comptroller has not extended the deadlines for franchise tax returns.
Other states are similarly taking one-off approaches.
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*This alert is provided for information purposes only and does not constitute legal advice and is not intended to form an attorney client relationship. Please contact your Sheppard Mullin attorney contact for additional information.*