COVID-19: IRS Dramatically Expands Tax Filing and Payment Relief

Due to the COVID-19 pandemic, the IRS has gradually postponed necessary tax filing and payment deadlines.

Now, the IRS has issued new guidance postponing almost all tax-related actions over the next few months. This latest postponement is much more extensive than anything granted previously.

We’ll explain whether you qualify for relief, what the IRS postponed, what the IRS didn’t postpone, and when your new deadline is for your important tax-related matters.

Who Qualifies?

You must be an individual taxpayer, a trust or estate, or a partnership or corporation to get relief under the

Tax Return Filing Postponed

You now have until July 15, 2020, to file your tax return if you have a federal tax return filing obligation ordinarily due on or after April 1, 2020, and before July 15, 2020.

If you need additional time beyond July 15, 2020, then you should file an extension on or before July 15, 2020. Your extended due date can go no further than your normal extended due date.

This relief applies to the following forms:

• Forms 1040, 1040-NR, 1040-PR, and 1040-SS
• Form 1120, Form 1120-S, and all other Form 1120 series returns
• Forms 1065 and 1066
• Form 1041 and all other Form 1041 series returns
• Form 706 and all other Form 706 series returns
• Form 8971
• Form 709
• Forms 990-T and 990-PF

If you originally filed an extension for your tax return and your extended due date falls within this period, then you have until July 15, 2020, to file that extended tax return.

This relief applies to all forms and schedules that you either attach to your tax return or file by the due date of your return, such as6

• Schedule H,
• Schedule SE, and
• international information returns, such as Forms 3520, 5471, 5472, 8621, 8858, 8865, and 8938.

According to the IRS, any tax election you need to make on a timely filed return will be considered as

Example 1. Your 2019 Form 1040, due on April 15, 2020, is now due July 15, 2020. You can file an extension, and the extended due date is October 15, 2020.

Example 2. Your C corporation has a fiscal year ending September 30, 2019. The 2019 C corporation tax return deadline was January 15, 2020, and you filed an extension. The extended due date is June 15, 2020. You now have until July 15, 2020, to timely file the 2019 C corporation tax return.

Tax Payments Postponed

You now have until July 15, 2020, to make your federal tax payment if you have a federal tax return

• payments of tax on any of the returns mentioned above;
• estimated tax payments for Forms 1040, 1120, 1041, and 990;
• Section 965 transition tax installment payments; and
• estate tax payments under tax code Sections 6166, 6161, or 6163.

Interest and penalties will start to accrue on postponed payments on July 16, 2020.

Example 3. You have an estimated tax payment requirement of $2,500 per quarter for your 2020 Form 1040. Before the IRS postponement, you had $2,500 due on April 15, 2020, and $2,500 due on June 15, 2020. You now have until July 15, 2020, to make both payments, totaling $5,000.

Payroll Taxes and Returns

You’ll continue to make federal tax deposits and file your payroll tax returns. The IRS has not postponed any payroll-related dates.

But your federal payroll tax deposits may be reduced or eliminated by the various temporary tax benefits created due to the COVID-19 pandemic, such as the

• paid sick leave credit,
• paid family leave credit,
• employee retention credit, and
• employer payroll tax deferral.

Time-Sensitive Actions Postponed

You have until July 15, 2020, to perform any time-sensitive actions that you had to act on or after April 1,

The time-sensitive actions postponed include the following:

• Filing a U.S. Tax Court petition
• Filing a claim for refund or credit of any tax
• Bringing suit for a claim for refund or credit of any tax
• The 180-day period to invest in a qualified opportunity zone investment for tax deferral
• Actions listed in Revenue Procedure 2018-58

Revenue Procedure 2018-58 is 139 pages long and provides a laundry list of postponed items. highlights include:

• S corporation elections and revocations
• Section 1031 like-kind exchange deadlines
• 60-day indirect IRA rollover deadline
• Form 5500 for employer retirement plans
• Section 83(b) elections for employer stock options

Remember, for your refund claim to be timely, you need to file it by the later of

• three years from the due date of the return, or
• two years from the date you paid the tax.

Example 4. You haven’t filed your 2016 Form 1040, which shows a refund of $1,500 due to withholding. Before this IRS relief, you had to file your return by April 15, 2020, to claim that refund. You now have until July 15, 2020, to timely file the return and receive the refund.

Example 5. You lost in an IRS audit and received a notice of deficiency, and your last day to petition the U.S. Tax Court to challenge the results is May 3, 2020. You now have until July 15, 2020, to timely file the petition.

Example 6. You distributed $5,000 from your traditional IRA on February 5, 2020. You’d normally have until April 5, 2020, to re-deposit the $5,000 as an indirect IRA rollover. You now have until July 15, 2020, to complete the indirect IRA rollover.

Form 990 Confusion

The IRS listed Form 990-T and Form 990-PF as postponed tax returns. But it did not list Form 990, due for calendar-year tax-exempt organizations on May 15, 2020, as a postponed tax return.

Even though the IRS didn’t specifically list it in its guidance, we believe you have until July 15, 2020, to file your calendar-year Form 990 return.

Takeaways

The IRS has given you a lot of breathing room to meet your tax obligations during the COVID-19 pandemic.

If the federal return, payment, or action is due on or after April 1, 2020, and before July 15, 2020, you now have until July 15, 2020, to:

• file the federal tax return,
• make the federal tax payments, and
• take that important time-sensitive tax action.

The IRS postponed hundreds of time-sensitive tax actions. Here’s a short list:

• Filing a U.S. Tax Court petition
• Filing a claim for refund or credit of any tax
• The 180-day period to invest in a qualified opportunity zone investment for tax deferral
• S corporation elections and revocations
• Section 1031 like-kind exchange deadlines
• 60-day indirect IRA rollover deadline

The most notable exceptions to the IRS postponement relief are federal payroll tax deposits and returns. You continue to file and pay on your regular schedule.

CARES Act Fixes TCJA Glitch on QIP, Requires Action

Congress made an error in the Tax Cuts and Jobs Act (TCJA) that limited your ability to fully expense your qualified improvement property (QIP).

The CARES Act fixed the issue retroactively to tax year 2018.

If you have such property in your prior filed 2018 or 2019 tax returns, you likely have no choice but to correct those returns. But the bright side is that the corrected law gives you options that enable you to pick the best tax result.

What Is QIP?

QIP is any improvement made by the taxpayer to the interior portion of a building that is non-residential real property (think office buildings, retail stores, and shopping centers) if you place the improvement in service after the date you place the building in service.

The CARES Act correction added the “made by the taxpayer” requirement to the definition.

QIP does not include any improvement for which the expenditure is attributable to

• • the enlargement of the building,
• • any elevator or escalator, or
• • the internal structural framework of the building.

QIP Problem

Due to a TCJA drafting error in the law, Congress made QIP 39-year property for depreciation purposes and ineligible for bonus depreciation.

Unusual twist. This drafting error did not affect expensing under Section 179. Under the TCJA, you could have elected to expense some or all of your QIP with Section 179.

But now you have to revisit your previously filed 2018 and 2019 tax returns and consider 100 percent bonus depreciation, 15-year depreciation, and Section 179 expensing.

QIP Solution

The CARES Act made QIP 15-year property and made it eligible for bonus depreciation retroactively as if Congress had included it in the TCJA when it originally became law.

This change requires you to take a one-time, lump-sum bonus depreciation deduction for the entire cost of your QIP in the tax year during which you place the QIP in service, unless you elect out.

If the QIP lump-sum deduction creates a net operating loss (NOL), you can carry back that loss to get almost immediate cash.

If you have QIP on a 2018 or 2019 tax return and think it could produce a net loss for that tax year, call me now on my direct line at xxx-xxx-xxxx. We can consider whether to start filing for a quick refund of your taxes paid in 2013 (for a 2018 carryback) or 2014 (for a 2019 carryback).

Sincerely,

THE FINANCIAL DREAM TEAM, USA