The U.S. Department of the Treasury (Treasury) and the IRS have extended the April 15 tax payment deadline to July 15, 2020, due to the novel coronavirus disease 2019 (COVID-19) pandemic.
On March 18, 2020, the IRS published Notice 2020-17 providing that individuals, regardless of filing status, may defer up to $1 million in tax payments due on April 15, 2020. For example, the $1 million threshold is the same for a single individual as it is for a married couple filing a joint return. The $1 million threshold also applies to trusts and estates. For consolidated groups, and C corporations that do not join in filing a consolidated return, relief is granted up to $10 million in tax payments due on April 15, 2020. According to Treasury Secretary Steven Mnuchin, this delay will free up $300 billion of liquidity in the economy.
This extension is automatic, meaning taxpayers may delay paying their federal income tax for up to 90 days and the IRS will not assess penalties or interest on payments made during the three-month deferral period. Interest and penalties on any unpaid balance will begin to accrue on July 16, 2020. In addition, any amount of unpaid federal income tax in excess of the thresholds listed above also will continue to accrue interest and penalties during the deferral period.
This relief applies only to federal income tax payments due for a taxpayer’s 2019 tax year, including tax on self-employment income. Estimated federal income tax payments due on April 15, 2020, regarding a taxpayer’s 2020 taxable year, also qualify for the 90-day extension. The dollar amount thresholds ($1 million for individuals and $10 million for corporations) apply in the aggregate to all the above types of federal tax payments. For example, if an individual taxpayer owes $800,000 in federal income tax for the 2019 tax year and $300,000 also is due in estimated federal income tax for the first quarter of 2020, only the first $1 million is eligible for relief from penalties and interest if paid between April 15, 2020, and July 15, 2020.
No payment extension is provided for any other type of federal tax or for the filing of any tax or information return, so individuals and businesses are still required to file their tax returns by April 15 unless they submit paperwork for an automatic six-month extension.
Several states also are announcing extensions to state tax filing and payment deadlines. California is granting a 60-day delay (until June 15) for individuals and businesses unable to file on time due to the COVID-19 outbreak. Maryland has extended the due date for business returns to June 1 and indicated the state will follow any federal extensions granted by the IRS. Colorado, Indiana, Michigan and Ohio also have indicated they would follow IRS guidelines and federal extensions. The American Institute of CPAs is keeping an updated list of state tax developments and extensions.
