COVID-19 Update: IRS Provides Guidance on Deferring April 15 Tax Payments

March 19, 2020

Clients and Friends of Topel Forman,

Yesterday, the Internal Revenue Service released guidance on the tax relief measures announced earlier this week by Treasury Secretary Mnuchin.  We are providing you with the following summary of the guidance provided in Notice 2020-17:

  • All taxpayers with applicable tax payments up to certain amounts (outlined below) that are due April 15th will have until July 15th to make those payments without incurring payment penalties, underpayment penalties or interest.  This is an extension to pay and NOT an extension to file.  Extensions or tax returns are still due April 15th, 2020.
  • This applies to the remaining 2019 tax liability and Q1 2020 estimated tax payment liability due April 15th.
  • This applies to income tax payments, including payment of self-employment taxes.  It does not apply to other types of payments such as payroll tax deposits.
  • The maximum aggregate amount of deferred payments (2019 balance due + Q1 2020 estimate) cannot exceed $1,000,000 for individuals and other non-corporate filers (including trusts), or $10,000,000 for corporations and consolidated groups.
  • This does not apply to Q2 2020 estimated tax payments due June 15th.  That payment is still due June 15th unless additional action is taken by the Treasury Department.
  • Interest and penalties will begin to accrue on July 16th for any postponed payments not paid in full by July 15th.
  • Interest and penalties will begin to accrue on April 16th for any payments in excess of $1M or $10M deferral limitations that are not paid by April 15th.
  • Reasonable cause abatement under IRC 6651 is available for taxpayers seeking additional relief from penalties and interest beyond what is provided in Notice 2020-17.

Topel Forman has made significant investments in technology and is committed to continuing to provide world-class service to our clients, even as our team has transitioned to a remote work environment.  For our clients that typically file by the April 15th deadline, we are still asking that you provide your tax documents to us by Monday, March 23rd, so that we can deliver a completed tax return to you for filing by April 15th.  You are strongly encouraged to upload your tax documents to the client portal as our ability to handle paper documents is very limited.  If we do not receive your information by March 23rd, it is likely that we are going to need to file for an extension.  Whether you file a tax return or an extension by April 15th, you will still have the ability to defer payment of your April 15th non-corporate tax liabilities up to $1,000,000 until July 15th without incurring any penalties or interest.

For our clients that will be needing an extension of time to file, please work with your contact at Topel Forman to gather any necessary information to prepare those extensions.  That process should be similar to prior years where we will provide you with the extension vouchers and payment recommendations.  If your recommended payment amount is less than $1,000,000, then you are not required to submit that payment until July 15th.  Topel Forman will electronically file the extensions on your behalf, or in the event that we are not able to electronically file a particular extension, we will advise you of any paper extension filings that you will be required to mail by April 15th.

Please note that the extension of time until July 15th to pay your Federal taxes due April 15th does not automatically apply to state payments.  Each state needs to provide separate guidance on their policies for deferring tax payments due April 15th.  Many states are expected to conform with the Federal guidance on payment deferral; however, absent any specific guidance, you may still be required to make state payments by April 15th or risk being subject to penalties and interest.

Please do not hesitate to reach out with any questions or concerns. We thank you for your patience during this unprecedented time and hope that you and your families stay safe. We will continue to advise you of any updates or additional guidance that the IRS and states will provide.

Sincerely,

John Riley, Managing Partner

Topel Forman LLC