As of April 9, 2020: Notice 2020-23 (April 9, 2020) Amplifies Notice 2020-18 and Notice 2020-20; Modifies Rev. Proc. 2014-42, applicable for calendar year 2020.
On April 9, 2020, the US Department of the Treasury (Treasury) released Notice 2020-23 (Notice 23). Notice 23 amplifies Notice 2020-18 (Notice 18), which granted income tax filing and payment relief to certain taxpayers affected by the COVID-19 emergency. Notice 23 also amplifies Notice 2020-20 (Notice 20) with respect to gift tax and generation-skipping transfer (GST) tax returns and, if applicable, payments due April 15, 2020. This Alert provides a brief summary of Notice 23, along with some considerations for you to discuss with your tax and legal advisors.
Notice 20 added to the list of Affected Taxpayers any person required to pay a federal gift tax or GST tax or required to file Form 709 (a federal gift and GST tax return) on April 15, 2020. The due date for filing Form 709 and paying federal gift tax and GST tax due April 15, 2020, is automatically postponed to July 15, 2020.
The relief is automatic; there is no need to request an automatic extension of time to file a gift tax and GST tax return or to pay any tax due with such return.
However, an Affected Taxpayer may choose to file Form 8892 by July 15, 2020, to obtain an extension to file Form 709 by October 15, 2020 (but note, any Federal gift tax and GST tax payments postponed by Notice 20 remain due on July 15, 2020). Any interest, penalty, or addition to tax for failure to file a Form 709 or to pay federal gift and GST taxes postponed by Notice 20 will begin to accrue on July 16, 2020.
Notice 23 provides additional tax return filing and tax payment relief for any person with a tax payment obligation as listed in Notice 23 (a Specified Payment) or a tax return or other form filing obligation as listed in Notice 23 (a Specified Form) which is due to be performed (whether originally due or due pursuant to a valid extension) between April 1, 2020, and July 15, 2020 (Specified Filing and Payment Obligations).
A list of Specified Forms is provided in the Appendix at the end of this alert. The relief extends to all schedules, returns, and other forms that are filed as attachments to Specified Forms or are required to be filed by the due dates of the Specified Forms. Importantly, elections that are required to be made on a timely filed Specified Form (or an attachment thereto) will be timely made if made on a Specified Form (or attachment thereto) filed on or before July 15, 2020.
Included are federal estate tax and GST tax returns (see Appendix), including estate tax payments of principal or interest: due as a result of an election to defer such tax on a closely held business, on a reversionary or remainder interest, or as a result of an extension of time to pay granted by IRS. Also, included is the annual recertification if an estate has extended the payment of estate tax on a closely held business.
Certain estimated income tax payments for the second quarter (see Appendix below), normally due between April 1, 2020 and July 15, 2020, are now due July 15, 2020.
The relief with respect to Specified Filing and Payment Obligations is automatic. There is no need to request an automatic extension of time to file or to pay tax. However, an Affected Taxpayer who requires more time to prepare and file a Specified Form may file an appropriate application for extension of time to file by July 15, 2020, to obtain an extension of time to file until the normal statutory or regulatory extended due date. Tax payments, however, remain due on July 15, 2020. Any interest, penalty, or addition to tax for failure to file a Specified Form or pay a Specified Payment will begin to accrue on July 16, 2020.
Taxpayers are often required to take certain actions within a specified time limit to receive beneficial tax treatment or to avoid negative tax consequences. Notice 23 includes as Affected Taxpayers any taxpayer required to take time-sensitive actions on or after April 1, 2020, and before July 15, 2020 (a Specified Time-Sensitive Action). Specifically included in the definition of Specified Time-Sensitive Action is the 180-day period to invest a capital gain in a Qualified Opportunity Fund so as to exclude such gain from gross income. Any Specified Time-Sensitive Action due to be performed on or after April 1, 2020, and before July 15, 2020, must now be taken by July 15, 2020.
The time limits for (i) filing petitions with the Tax Court, (ii) review of a decision rendered by the Tax Court, (iii) filing a claim for credit or refund of any tax, and (iii) bringing suit upon a claim for credit or refund of any tax, if previously due on or after April 1, 2020, and before July 15, 2020, is now extended to July 15, 2020.
If the period for taking such action expired before April 1, 2020, there is no extension. As with taxpayers, the IRS is also required to perform certain acts within statutory and regulatory time limits (a Time-Sensitive IRS Action). The following persons are Affected Taxpayers for the limited purpose of giving the IRS more time to handle such Affected Taxpayers’ matters:
- persons who are currently under examination (including an investigation to determine liability for an assessable penalty);
- persons whose cases are with the Independent Office of Appeals; and
- persons who, during the period beginning on or after April 6, 2020, and ending before July 15, 2020, file written documents described in section 6501(c)(7) of the Internal Revenue Code (amended returns) or submit payments with respect to a tax for which the time for assessment would otherwise expire during this period.
With respect to such Affected Taxpayers, the IRS is granted a 30-day postponement of time to perform such Time-Sensitive IRS Action if the last date for performing such action is on or after April 6, 2020, and before July 15, 2020. This 30-day postponement is disregarded in determining whether the IRS performs such actions in a timely manner.
We recommend you consult your tax advisor with respect to the potential application of this new tax relief to your specific situation.
Appendix: Specified Forms (by form number)
1040, U.S. Individual Income Tax Return,
1040-SR, U.S. Tax Return for Seniors,
1040-NR, U.S. Nonresident Alien Income Tax Return,
1040-NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents,
1040-PR, Self-Employment Tax Return - Puerto Rico,
1040-SS, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico);
1120, U.S. Corporation Income Tax Return,
1120-C, U.S. Income Tax Return for Cooperative Associations,
1120-F, U.S. Income Tax Return of a Foreign Corporation,
1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation,
1120-H, U.S. Income Tax Return for Homeowners Associations,
1120-L, U.S. Life Insurance Company Income Tax Return,
1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons,
1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return,
1120-POL, U.S. Income Tax Return for Certain Political Organizations,
1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts,
1120-RIC, U.S. Income Tax Return for Regulated Investment Companies,
1120-S, U.S. Income Tax Return for an S Corporation, and
1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B);
1065, U.S. Return of Partnership Income, and
1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return;
1041, U.S. Income Tax Return for Estates and Trusts,
1041-N, U.S. Income Tax Return for Electing Alaska Native Settlement Trusts, and
1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts;
706, United States Estate (and Generation-Skipping Transfer) Tax Return,
706- NA, United States Estate (and Generation-Skipping Transfer) Tax Return,
706-A, United States Additional Estate Tax Return,
706-QDT, U.S. Estate Tax Return for Qualified Domestic Trusts,
706-GS(T), Generation-Skipping Transfer Tax Return for Terminations,
706-GS(D), Generation-Skipping Transfer Tax Return for Distributions, and
706-GS(D-1), Notification of Distribution from a Generation- Skipping Trust (including the due date for providing such form to a beneficiary);
706, United States Estate (and Generation-Skipping Transfer) Tax Return, filed pursuant to Revenue Procedure 2017-34;
8971, Information Regarding Beneficiaries Acquiring Property from a Decedent and any supplemental Form 8971, including all requirements contained in section 6035(a) of the Code;
709, United States Gift (and Generation-Skipping Transfer) Tax Return that are due on the date an estate is required to file Form 706 or Form 706-NA;
Estate tax payments of principal or interest due as a result of an election made under sections 6166, 6161, or 6163 and annual recertification requirements under section 6166;
990-T, Exempt Organization Business Income Tax Return (and proxy tax under section 6033(e) of the Code);
990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation,
4720, Return of Certain Excise Taxes under Chapters 41 and 42 of the Internal Revenue Code;
990-W, Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations,
1040-ES, Estimated Tax for Individuals,
1040-ES (NR), U.S. Estimated Tax for Nonresident Alien Individuals,
1040-ES (PR), Estimated Federal Tax on Self Employment Income and on Household Employees (Residents of Puerto Rico),
1041-ES, Estimated Income Tax for Estates and Trusts
1120-W, Estimated Tax for Corporations.
As of March 20, 2020: Notice 2020-18 (March 20, 2020) supersedes Notice 2020-17 (March 18, 2020); IRS Releases Filing and Payment Deadlines Questions and Answers (March 24, 2020).
On March 20, 2020 The United States Department of the Treasury released Notice 2020-18 which provided additional tax relief to taxpayers affected by the COVID-19 emergency. Notice 2020-18 restated and expanded the relief provided by Notice 2020-17. The notice supersedes Notice 2020-17. On March 24, 2020, IRS released Filing and Payment Deadlines Questions and Answers on its website interpreting the notice. The Treasury Department and the IRS continue to consider additional guidance on the issues addressed in the FAQ.
Any person with a federal income tax payment or a federal income tax return due April 15, 2020, is an “Affected Taxpayer”. A “person” is “construed to mean and include an individual, a trust, estate, partnership, association, company, or corporation”.
For Affected Taxpayers, the due date for filing federal income tax returns and for making federal income tax payments that would have been due April 15, 2020, is postponed to July 15, 2020.
- There is no limit on the amount of tax that can be postponed until July 15, 2020.
- There is no need to request an extension to file returns subject to the notice.
Only the following tax payments and tax returns are eligible for this automatic extension:
- federal income tax payments (including payments of tax on self-employment income) and federal income tax returns due on April 15, 2020, in respect of an Affected Taxpayer’s 2019 tax year, and
- federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an Affected Taxpayer’s 2020 tax year.
No extension is provided for the payment or deposit of any other type of federal tax or the filing of any federal information return.
- Gift tax on gifts made in 2019 and gift tax returns with respect to gifts made in 2019 (even if no tax is due) must be filed by their regular due date of April 15, 2020.
- The notice does not postpone the payment of estimated income tax due June 15, 2020, with respect to a taxpayer’s 2020 tax year.
Interest, penalties, and additions to tax for failure to file federal income tax returns and to pay federal income tax postponed by the notice will begin to run on July 16, 2020.
A number of other important dates are tied to the due date for filing an individual’s federal income tax return.
The IRS has interpreted the notice to postpone a number of these dates to July 15, 2020:
- An individual may make contributions to an IRA for the 2019 tax year up to the date such individual's 2020 federal income tax return is due (without extension). The deadline for making contributions to an IRA for 2019 is extended to July 15, 2020.
- An individual may make contributions to a health savings account (HSA) or Archer medical savings account (MSA) for the 2019 tax year up to the date such individual's 2020 federal income tax return is due without extension). The deadline for making contributions to an HSA or Archer MSA for 2019 is extended to July 15, 2020.
Not extended, however, is the deadline for making corrective distributions of excess deferrals made in 2019 to a workplace-based retirement plan. To avoid double taxation of an excess deferral (for the year in which it is made to the plan and also for the year it is returned to the employee), the excess deferral (and any income allocable to such amount through the end of the taxable year in which it is made) must be returned to the employee by April 15 of the year following the year of contribution. The deadline is specified by the date itself; accordingly, the deadline for corrective distributions of excess deferrals made to work-based retirement plans in 2019 remains April 15, 2020.
Notice 2020-18 only applies to federal income tax. The legislature of each state sets rules for the filing of state returns and the payment of state taxes. You should contact your personal tax advisor to determine how the Notice affects your specific situation and to inquire if there is any similar emergency tax relief from your state taxing authority.
For more information, please consult your PNC Advisor or contact PNC Wealth Management.