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IRS Heeds Critiques, Issues New Notice on Tax Deadlines

Posted on Mar. 23, 2020

Facing a groundswell of criticism, Treasury opted to heed calls from tax organizations and shift the April 15 tax return filing deadline into the summer.

“At [President Trump’s] direction, we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties,” Treasury Secretary Steven Mnuchin announced early in the day in a March 20 tweet.

The IRS then followed that up by issuing Notice 2020-18, 2020-15 IRB 1, later that evening, making Mnuchin’s announcement official, along with several tweaks to the guidance it had issued earlier in the week.

The new notice affirms that the IRS will automatically treat July 15 as the new deadline for both federal income tax payments and for filing tax returns. It also removes the caps on the amount of tax payment that can be postponed. An earlier notice had set a $1 million cap on income tax payments by individuals that could be postponed and a $10 million cap on tax payments by corporate taxpayers.

The IRS notice makes it clear that the April 15 deadline for making contributions to IRAs and health savings account for 2019 has been changed to July 15 as well, according to Sean Mullaney of Mullaney Financial & Tax.

The IRS tweaked its language in the new notice to say that it was automatically changing, rather than extending, the date for filing tax returns. That language is key, because section 219(f)(3) indicates that contributions must be made by the due date for tax returns, excluding returns that are extended, Mullaney told Tax Notes.

“This gives taxpayers and preparers more time to determine whether taxpayers qualify to make 2019 contributions and whether such contributions are advisable,” Mullaney said.

The change came amid a wave of criticism after the IRS issued Notice 2020-17, 2020-15 IRB 1, extending the April 15 deadline for making tax payments to July 15, but leaving in place the deadline for filing tax returns. Tax observers complained that extending the deadline for tax payments alone was insufficient relief given the circumstances and was unnecessarily confusing to taxpayers.

Robert Kerr of the National Association of Enrolled Agents said the initial decision to bifurcate the deadlines created a distinction that was lost on many taxpayers. “We had 700,000 return preparers thinking one thing, and then hundreds of millions of taxpayers thinking something else. So this gets everyone back on the same page,” he said.

The American Institute of CPAs, which had issued a harsh rebuke of Treasury’s earlier decision, praised the department for its reversal. AICPA President and CEO Barry Melancon urged CPAs and other tax professionals to take the Trump administration’s advice and encourage clients expecting refunds to go ahead and file.

“There is great need to support the U.S. economy, and it is urgently critical that refund returns are filed as quickly as possible,” Melancon said in a March 20 statement. “Our profession has a tremendous opportunity to create economic stimulus when we help taxpayers submit a refund return.”

The Times They Are A-Changin’

The move by Treasury to merge the deadlines to July 15 came as welcome relief to many tax professionals, but those deadlines could well change again soon.

The phase 3 economic relief package proposed by Senate Republicans March 19 calls for shifting the estimated tax payment deadlines to October 15, although it would keep the July 15 filing deadline in place.

Reactions to the prospect of further deadline shifts were mixed.

Congress granting an additional extension would be fine, but I think most of us are relieved that the immediate pressure is off, especially with more business shutdown orders in place around the country,” said Edward K. Zollars of Thomas, Zollars & Lynch Ltd.

National Society of Accountants CEO John Rice said another extension by Congress would be premature at this point. “There’s so many moving parts here that frankly, I think we just need some of those moving parts to come to a standstill,” he told Tax Notes.

“I think July 15 is an appropriate distance from where we are today,” Rice added.

Another key issue for taxpayers and tax professionals is whether states will follow the federal government’s lead and conform their tax season due dates to those of the IRS.

“The elephant in the room is that the states need to get in line,” Rice said. Some states, like California, have already issued statements affirming that they intend to follow the federal approach, “but there are a lot of states in between,” he said.

As for whether states are likely to conform, Rice said he “would encourage it profusely,” and added that it wouldn’t be in anybody’s best interest not to do so.

Kerr said the circumstances are so extreme right now that federal-state conformity is almost guaranteed. “The amount of pressure on this particular issue will be too much for states to withstand,” he predicted.

While You’re at It . . . 

Mnuchin’s announcement settled the main concern on many tax professionals’ minds, but there are other lingering questions they would like the IRS to address in coming guidance.

“My impression is that unless it’s changed, it’s the same. . . . If you don’t have guidance about whether something changed, you have to assume it did not,” Kerr said.

Kerr said his organization’s members would also like to know if Treasury plans to extend the May 15 deadline for nonprofits to file their Forms 990.

“Anything that’s not an April 15 deadline is just hanging out there,” Kerr said.

Zollars said it's important that Treasury issue further guidance addressing tax items related to the April 15 date, although not directly tied to the deadlines for filing returns or paying taxes, such as whether the due date for installment payments under section 965 will change.

The IRS seemed to acknowledge critiques of the original notice, which by its terms had postponed the April 15 deadline for first-quarter estimated tax payments, but left in place the June 15 deadline for second-quarter payments, effectively making the second-quarter payment due before the first.

The new notice includes language stating that it would not impose interest, penalties, or addition to tax for failure to pay federal income taxes between April 15 and July 15.

Joe Kristan of Eide Bailly LLP initially said he interpreted that language as clearly covering the June 15 date for second-quarter estimated tax payments. But after closer inspection, he said he came to the conclusion that the notice doesn’t appear to extend any tax relief to those payments.

Glen Birnbaum of Heinold Banwart Ltd. noted that the new notice states that the relief is provided “solely with respect to . . . federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020.”

In any case, the IRS should clarify its intent here, Birnbaum said.

Kristan also observed that with the return filing deadline postponed to July 15, it’s unclear if taxpayers who still choose to file for an extension will only have until October 15 — the normal due date for extended returns — to file, or if they will now have until January 2021.

Closing Up Shop

Treasury and the IRS’s relief for taxpayers comes as the IRS is undergoing drastic workplace changes.

The IRS has temporarily shuttered its Taxpayer Assistance Centers, saying in a March 20 statement that the centers will discontinue face-to-face service until further notice. Likewise, the Taxpayer Advocate Service said it has suspended walk-in services but will continue to offer assistance via phone.

Nevertheless, National Treasury Employees Union President Tony Reardon said the IRS’s strategy for ensuring employee safety related to COVID-19 hasn’t been enough.

Although the IRS has taken several positive steps, like expanding remote work options, shifting call center workers to telework options, and halting face-to-face work for field officers and revenue agents, the NTEU “remains troubled about large numbers of employees still reporting to work contrary to the recommended gathering sizes,” as well as insufficient supplies for sanitizing work environments, according to Reardon.

Reardon recommended that policymakers extend the return filing deadline to October 15 to relieve pressure on both taxpayers and IRS employees, and he recommended closing all IRS facilities where more than 50 employees work.

“A broader shutdown of the IRS would give the agency time to clean all facilities and prepare to bring back those employees essential to issuing refunds to taxpayers and stimulus checks, as needed,” Reardon said.

Clarification, March 21, 2020: Kristan subsequently said he does not believe the June 15 due date for second-quarter payments is covered by the relief.

Follow Jonathan Curry (@jtcurry005) on Twitter for real-time updates.

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