COVID-19 Emergency Tax Postponement Relief: The IRS Expands Its Scope

By:
Kevin Matz, JD, Esq., CPA, LLM
Published Date:
May 1, 2020

On Apr. 9, 2020, as a further response to COVID-19, the U.S. Treasury Department and the IRS issued Notice 2020-23, which significantly expanded the scope of the emergency tax postponement relief. The relief granted by the new notice covers taxpayers who have an IRS tax filing or payment deadline between Apr. 1 and Jul. 15, 2020. It applies to fiscal-year entities (such as Form 1041 for estates); Form 706 estate tax returns (including federal estate tax returns that are already on extension); nonprofit organizations (both for public charities on Form 990 and for private foundations on Form 990-PF); and a multitude of information returns and other forms, including Form 3520 (which relates to reporting certain transactions with foreign trusts and gifts from nonresident aliens) and Form 8938 (which reports specified foreign financial assets).

In addition, the deadline for calendar-year 2020 second-quarter estimated tax payments has been moved from Jun. 15 to Jul. 15. Also postponed to Jul. 15 is the timeframe to perform certain acts that do not necessarily involve tax return filings, including—

  • the timeframe to obtain treatment as a “qualified disclaimer” for federal gift tax purposes, accomplished as a result of Notice 2020-23’s reference to Revenue Procedure 2018-58 (any person performing a time-sensitive action listed therein, due to be performed on or after Apr. 1, 2020, and before Jul. 15, 2020, is an “affected taxpayer” who now has until Jul. 15, 2020, to perform all such specified time-sensitive actions; this supplements the itemized list of postponed tax filing and payment obligations set forth in Notice 2020-23), and
  • the 180-day period to invest capital gains in a qualified opportunity fund, where such investment would otherwise be required on or after Apr. 1, 2020, and before Jul. 15, 2020.

The relief is automatic, so taxpayers don't need to file any extension forms or take any other action to qualify for it. This expanded relief follows the IRS’s prior issuance of Notice 2020-18, which postponed the due date for both filing federal income tax returns and making federal income tax payments from Apr. 15, 2020, to Jul. 15, 2020, and Notice 2020-20, which pushed back the Apr. 15 gift tax return filing and payment deadline to Jul. 15, 2020.

Additional Details 

Notice 2020-23 grants postponement relief through Jul. 15, 2020, for each of the following, which would otherwise come due between Apr. 1, 2020, and Jul. 15, 2020:

  • Filing Form 706, “United States Estate (and Generation-Skipping Transfer) Tax Return,” payment of federal estate and generation-skipping transfer tax (with relief also to apply to estate tax returns that are already on extension), and similar tax return filing and payment relief for related Form 706 series returns.
  • Making installment payments of estate tax under IRC sections 6166, 6161, or 6163 that are due in 2020.
  • Extending the individual retirement account (IRA) contribution deadline of Apr. 15, 2020.
  • Filing Form 3520 (which relates to reporting certain transactions with foreign trusts and gifts from nonresident aliens) and payment of related tax.
  • Form 990 and related filings and payment of tax.
  • Form 990-PF and related filings and payment of tax.
  • Federal income tax filing and tax payment deadlines that are scheduled to occur prior to Jul. 15, 2020, for fiscal-year taxpayers such as estates, as well as for other categories of entities (with such relief also to apply to fiscal-year income tax returns that are already on extension).
  • Filing Form 8971, “Information Regarding Beneficiaries Acquiring Property from a Decedent.”

Notice 2020-23 further states that the Secretary of the Treasury has also determined that any person performing a time-sensitive action listed in the applicable Treasury Regulations or Revenue Procedure 2018-58, which is due to be performed on or after Apr. 1, 2020, and before Jul. 15, 2020 (“specified time-sensitive action”), is an “affected taxpayer,” whose deadline for the specified time-sensitive action is now postponed to Jul. 15, 2020. Revenue Procedure 2018-58 includes a large number of items, including the filing of the Form 990 for public charities and the making of qualified disclaimers. (For purposes of this notice, the term “specified time-sensitive action” also includes an investment at the election of a taxpayer due to be made during the 180-day period described in IRC section 1400Z-2(a)(1)(A). This pertains to the contribution of capital gains to a qualified opportunity fund, where such investment would otherwise be required on or after Apr. 1, 2020, and before Jul. 15, 2020.)

Notice 2020-23 provides that for an affected taxpayer with respect to “specified filing and payment obligations,” the due date for filing “specified forms” and making “specified payments” is automatically postponed to Jul. 15, 2020. This relief is automatic—affected taxpayers do not have to call the IRS or file any extension forms, or send letters or other documents to receive this relief. However, affected taxpayers who need additional time to file may choose to file the appropriate extension form by Jul. 15, 2020, to obtain an extension to file their return, but the extension date may not go beyond the original statutory or regulatory extension date. For example, a Form 4868, “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return,” may be filed by Jul. 15, 2020, to extend the time to file an individual income tax return, but that extension will only be to Oct. 15, 2020. That extension will not extend the time to pay federal income tax beyond Jul. 15, 2020.

This relief includes not just the filing of specified forms, but also all schedules, returns, and other forms that are filed as attachments to specified forms or are required to be filed by the due date of specified forms, including, for example, Schedule H and Schedule SE, as well as Forms 3520, 5471, 5472, 8621, 8858, 8865, and 8938. This relief also includes any installment payments under IRC section 965(h) due on or after Apr. 1, 2020, and before Jul. 15, 2020. Finally, elections that are made or required to be made on a timely filed specified form (or attachment) shall be timely made if filed, as appropriate, on or before Jul. 15, 2020.

As a result of the postponement of the due date for filing specified forms and making specified payments, the period beginning on Apr. 1, 2020, and ending on Jul. 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to file the specified forms or to pay the specified payments postponed. Interest, penalties, and additions to tax with respect to such postponed specified filing and payment obligations will begin to accrue on Jul. 16, 2020. 

In addition, affected taxpayers also have until Jul. 15, 2020, to perform all specified time-sensitive actions that are due to be performed on or after Apr. 1, 2020, and before Jul. 15, 2020. This relief includes the time for filing all petitions with the Tax Court, or for review of a decision rendered by the Tax Court, filing a claim for credit or refund of any tax, and bringing suit upon a claim for credit or refund of any tax. This notice does not provide relief for the time period for filing a petition with the Tax Court, or for filing a claim or bringing a suit for credit or refund if that period expired before Apr. 1, 2020.

What Will New York State Do Next?

Governor Andrew M. Cuomo previously announced New York’s intention to match the federal income tax relief granted through Notice 2020-18, which postponed the due date for both filing federal income tax returns and making federal income tax payments from Apr. 15, 2020, to Jul. 15, 2020. 

On Mar. 29, 2020, the New York State Tax Department confirmed and executed upon this through its issuance of Notice N-20-2. This notice confirmed that New York has extended the Apr. 15, 2020, due date to Jul. 15, 2020, for New York State personal income tax and corporation tax returns originally due on Apr. 15, 2020. In addition, New York is allowing taxpayers to defer all related tax payments due on Apr. 15, 2020, to Jul. 15, 2020, without penalties and interest, regardless of the amount owed. This extension applies to individuals, fiduciaries (estates and trusts), and corporations. Tax returns due on Apr. 15, 2020, will automatically be granted the filing and payment deadline extension and relief from penalties and interest without having to file an extension form.

Notice N-20-2 specifically provides that “2019 returns due on April 15, 2020, and related payments of tax or installments of tax, including installments of estimated taxes for the 2020 tax year, will not be subject to any failure to file, failure to pay, late payment, or underpayment penalties, or interest if filed and paid by July 15, 2020.” However, “[n]o extension is provided in this notice for the payment or deposit of any other type of state tax, or for the filing of any state information return.” Accordingly, it seems that New York second-quarter 2020 estimated income tax payments for calendar-year taxpayers would still be due on Jun. 15, 2020 (at least as of this writing). 

It remains to be seen whether the new IRS Notice 2020-23 will provide an impetus for New York State to reevaluate its position on second-quarter 2020 estimated tax payments, and moreover to consider other forms of postponement relief, including for the filing of the Form ET-706 and the payment of New York State estate tax. There is also an open issue whether New York will provide postponement relief for renunciations of interests under section 2-1.11 of New York’s Estates, Powers and Trusts Law to correspond to the relief granted to qualified disclaimers under IRS Notice 2020-23, particularly given that many of the New York Surrogate’s Courts are generally closed as of this writing.


Kevin Matz, JD, Esq., CPA, LLM, is a partner at the law firm of Stroock & Stroock & Lavan LLP in New York City. His practice is devoted principally to domestic and international estate and tax planning, family offices, and qualified opportunity zone (QOZ) funds, and he is a Fellow of the American College of Trust and Estate Counsel (ACTEC) and a co-chair of the Tax Committee of the Trusts and Estates Law Section of the New York State Bar Association. Mr. Matz is also currently the Secretary/Treasurer of the NYSSCPA and a past president of the Foundation for Accounting Education’s Board of Trustees. He writes and lectures frequently on estate and tax planning topics. He can be reached at kmatz@stroock.com or 212-806-6076.

 
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