30 March 2020

US federal and state income tax compliance adjustments in the wake of the coronavirus pandemic


In response to the economic turbulence sparked by the COVID-19 pandemic, the federal government, along with several states, have granted taxpayers automatic extensions for filing and paying their 2019 taxes.

Federal Relief

Income Taxes

On March 20, the IRS published Notice 2020-18 under authority of the President’s March 13 Emergency Declaration. The notice states that the IRS will provide a 90-day amnesty period following April 15, 2020, in which individuals can defer both filing and payment of income taxes for 2019 and estimated income taxes for the first quarter of 2020.

Notice 2020-18 expanded on Notice 2020-17, published on March 18, which provided an extension for payments, but not for filings. Also in contrast to Notice 2020-17, there are now no dollar limits on the amount of tax payments that can be deferred. As long as returns are filed and payments are made by July 15, 2020, taxpayers will accrue no interest or penalties for late filing or late payment. (Note that IRS Form 4868 remains available, as usual, to request a six-month filing extension for income tax returns.)

Transfer Taxes

On March 27, the IRS published Notice 2020-20, which extends the relief in Notice 2020-18 to include federal gift taxes and generation-skipping transfer (GST) taxes. Specifically, returns and payments for gift and GST taxes originally due on April 15, 2020 are now due on July 15, 2020. (IRS Form 8892 remains available, as usual, to request a six-month filing extension.) However, the amnesty does not currently apply to federal estate or excise taxes, so deadlines for those taxes remain unchanged.

Collections

On March 17, the IRS notified its employees of the indefinite suspension of its automated collection system, which sends payment demands to delinquent taxpayers and sends levy notices to those taxpayers’ employers and banks.

State Relief

Several states have also announced relief measures, including the following:

  • California: All tax filing and payment deadlines between March 15, 2020 and June 15, 2020 are extended to July 15, 2020. These deadlines include those for partnership and LLC tax returns, individual income tax returns, and estimated tax payments for the first and second quarters of 2020.
  • Connecticut: Filing and payment deadlines for 2019 personal income taxes, and for estimated personal income taxes for the first and second quarters of 2020, are extended to July 15. Filing and payment deadlines for partnership, LLC, and corporation tax returns are extended to June 15.
  • Maryland: Payments of individual income taxes and business income taxes due on April 15 will now be due on July 15. (As of March 23, the April 15 filing deadline for income taxes appears to remain the same.) Filing and payment deadlines for business taxes other than income taxes (e.g., sales and use taxes) are extended to June 1, 2020.
  • Massachusetts: Filing and payment deadlines for 2019 personal income taxes are extended to July 15.
  • New Jersey: Individual income and business tax returns and payments due on or before April 15 will now be due on June 30, without penalty or interest.
  • New York State: Filing and payment deadlines for 2019 personal income taxes, 2019 corporation taxes, and 2020 first-quarter estimated taxes are extended to July 15.
  • New York City: Business and excise tax returns due between March 16 and April 25 can be filed late without penalty, if the taxpayer marks “COVID-19” on the return. Payments under these returns may also be made late without penalty, although interest will accrue from the original due date.

Additionally, many states have recently pledged to mirror any amnesty policies finalized by the IRS. In light of the IRS’s March 20 notice, this means that many taxpayers can expect a 90-day filing and/or payment extension for their state income taxes.

Tax extension policies are continuing to develop rapidly at both the federal and state level, so we advise clients to check the IRS website and their applicable state government websites regularly for the most up-to-date news.

If you would like to discuss how you could put this information to use for you and your family, please consult your Withers Bergman tax attorney.

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