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IRS FAQ Offers ‘Much-Needed’ Clarity on Filing Season Changes

Posted on Mar. 25, 2020

Tax practitioners had many questions after the IRS issued guidance late last week postponing the tax return filing deadline into the summer. Now, the agency is starting to roll out some answers.

The IRS posted an FAQ on its website March 24 that it says will be updated periodically with questions and answers related to Notice 2020-18, 2020-15 IRB 1, the agency’s latest guidance on changes to the 2020 return filing season.

The FAQ format is “designed to be a flexible tool” to share information with taxpayers and tax professionals during this tumultuous tax season, the IRS said.

Among the key issues the IRS clarified are that the April 15 deadline for making contributions to a health savings account or an IRA for 2019 is automatically extended to July 15, and that any section 965 transition tax installment payments that were due April 15 are now due July 15, as are any base erosion and antiabuse tax payments that were due April 15. The IRS also affirmed that fiscal-year taxpayers whose 2019 income tax return is due April 15, whether that is the original due date or the result of an extension, have had their due date extended to July 15.

The IRS issued the widely maligned Notice 2020-17, 2020-15 IRB 1, March 18, which only extended the April 15 deadline for making federal income tax payments and left in place the April 15 deadline for filing tax returns. The agency then followed that up several days later with Notice 2020-18, which made several tweaks to the original notice but still left tax professionals uncertain about several issues.

Three Cheers for the IRS

Coming after weeks of uncertainty over the filing season, the FAQ was welcomed by many practitioners.

The FAQ makes clear that the IRS has granted relief only for April 15 tax deadlines thus far, PwC’s Beth Tucker said on a March 24 webinar hosted by her firm.

Tucker deemed the extension for transition tax installment payments a pleasant surprise, saying it was “something we didn’t think they would do but they did.”

Damien Martin of BKD LLP likewise praised the IRS for issuing an FAQ that provides “welcome and much-needed clarifications following a roller coaster ride of back and forth on the federal filing and payment due date.”

Strange Results

Not all of the IRS’s answers were favorable to taxpayers.

Notice 2020-18 was clear that first-quarter estimated tax payments due April 15 are now due July 15, but some practitioners had wondered whether the guidance extended any relief to the June 15 due date for second-quarter estimated tax payments. The answer, according to the IRS, is no.

That effectively makes second-quarter estimated payments due one month before the first-quarter payment.

“That’s still very, very strange to people,” Jeffrey Levine of Buckingham Wealth Partners told Tax Notes. “They should have pushed that.”

Rick Cohen of the National Council of Nonprofits voiced disappointment that the IRS failed to provide any relief for nonprofits with Forms 990 that are due May 15.

“The nonprofits that have not had to shut their doors right now are facing huge increases in demand for their services, and that’s not going to let up anytime soon. As difficult as it is for an individual taxpayer to be working on their taxes right now, try talking to a small nonprofit that is simply trying to keep their doors open to keep serving their community,” Cohen said.

Taxpayers also ordinarily have the option of extending their April 15 tax deadlines until October 15 by filing a Form 4868, “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return,” and some practitioners had asked if the extended filing date would remain October 15 or shift to another date, like January 2021, to reflect the new filing season deadlines. However, the FAQ indicates that the October 15 deadline for extended filing remains in place.

“I think probably every CPA and their brother would hate to have that [the January 2021 extension] happen, because it would basically make your two tax deadlines the middle of summer and Christmas,” Levine said, although he added that given the national crisis over the coronavirus, it’s not unrealistic or unfair to push those dates back for the public welfare.

Joe Kristan of Eide Bailly LLP said he was “slightly surprised” that the IRS opted not to extend the deadline for filing Form 709, “United States Gift (and Generation-Skipping Transfer) Tax Return,” because “they are often prepared along with [Form] 1040s and have the same due date.” The FAQ is explicit that the normal payment and filing deadlines for estate and gift taxes remain unchanged.

That outcome is consistent with the relief spelled out in the IRS notice, though, Kristan added.

More, Please

While practitioners welcomed the added clarity from the IRS, there are still issues they’d like the agency to address.

The FAQ now makes clear that taxpayers have until July 15 to make HSA and IRA contributions, but there are other related deadlines that do not appear to have been extended, like the April 15 deadline for employer contributions to SEP IRAs or SIMPLE IRAs, Levine observed.

Levine also questioned why the IRS was providing piecemeal tax relief and being “so dogmatic” about not extending other tax deadlines in the first place.

The IRS is undoubtedly busy, “but at the same time, if they just did this once and did blanket, easily understood relief that applied across the board, they wouldn’t have to revisit it 17 times in 18 days,” he said.

Tucker and Kevin Brown, also of PwC, said the section on information returns isn’t clear.

“The way they have written this would lead one to believe they’re saying that information returns are actually due before the return they’re attached to,” Tucker said. “I don’t believe that is what the IRS intends, but that will definitely be one where we’ll be asking for additional FAQ clarification.”

Brown said not to give up hope on some of the disappointing news in the FAQs, like the lack of relief for payroll and excise taxes.

“I think if you can make a case to Treasury as to why those things should be changed, they are listening,” Brown said.

And even if Treasury doesn’t listen, Congress might, Levine said. A draft of the Senate Republicansphase 3 stimulus bill, for example, would have changed the due dates for the first three 2020 estimated tax payments to October 15 and statutorily changed the return filing deadline to July 15, which would then have the effect of making the return filing due date for taxpayers that filed for an extension January 15, 2021.

“It’s a very fluid situation,” Levine said.

Stephanie Cumings contributed to this article.

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