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Administrative Relief Provides Automatic Extensions to Pay Federal Income Taxes and File Federal Income Tax Returns

March 21, 2020

In response to the coronavirus pandemic, the April 15 federal income tax payment and return filing deadlines have been extended. On Friday, March 20, 2020, Treasury Secretary Steven Mnuchin announced that affected taxpayers are granted an automatic extension to July 15, 2020, for payment of required federal income taxes (including tax on self-employment income) and to file federal income tax returns that otherwise would have been due April 15, 2020.

Affected taxpayers for these purposes include individuals, trusts, estates, partnerships, associations, companies, and corporations.

Below is a summary of key points addressed in the Mnuchin announcement and subsequent IRS guidance in the form of Notice 2020-18.

Federal Income Tax Payment Deferral

There is no limit on the amount of the federal income tax (including self-employment tax) payments that are deferred. Prior guidance, which included limitations on the amount of the deferred tax payment, has been superseded. Taxpayers are not required to file any additional forms or contact the IRS to qualify for the tax payment extension.

Eligible Taxes

Federal taxes eligible for payment relief include:

  1. Income tax payments due on April 15, 2020, in connection with the 2019 taxable year; and
  2. Estimated income tax payments for the 2020 taxable year due on April 15, 2020.

Both of the above eligible taxes include tax on self-employment income.

Note: income tax and self-employment tax payments due before April 15, 2020, are not eligible for relief. No extension is provided for the payment of any other type of federal tax.

Second quarter estimated income tax payments due June 15, 2020, have not been addressed. Accordingly, taxpayers should plan to abide by the normal payment schedule (subject to the discussion of pending legislation below).

Federal Income Tax Return Filing Postponement

The deadline for filing federal income tax returns otherwise due April 15, 2020, is now extended to July 15, 2020.

No extension is provided for the filing of any federal information return.

Penalty and Interest Relief

No “failure to pay” or “failure to file” penalties, interest, or additions to tax will be assessed on the taxpayer for federal income taxes and income tax returns covered by Notice 2020-18 during the extension period. Penalties, interest and additions to tax will begin accruing on July 16, 2020, with respect to tax payments and tax return filings postponed pursuant to this guidance.

Pending Legislation

In addition to this administrative relief for taxpayers, Congress is currently considering legislation that would further delay the due date for the payment of estimated taxes in 2020.

Please contact James H. Combs, Honigman’s Tax Practice Group Leader, or one of the other tax attorneys in Honigman’s Tax Practice Group for advice on how the tax payment and tax return filing extensions or COVID-19 more generally may impact tax planning for you, your family or your company, and for factors to consider this tax season.