As COVID-19 has been disrupting our personal and professional lives, the April 15 tax deadline continued to loom on the horizon. In welcome news for many, on Friday, Treasury Secretary Steven Mnuchin announced, via Twitter, that the April 15 income tax deadline would be extended, allowing individuals to wait until July 15, 2020, to file their returns and pay any balances due.
The IRS followed up by issuing Notice 2020-18, which provides clarity on a number of fronts. First, the IRS explained that this change represents a “postponement” of the due date for filing income tax returns and income tax payments due on April 15. The Notice clarified that this postponement applies to first-quarter estimated tax payments (also due on April 15, 2020), meaning that these payments are also now due on July 15, 2020. Interestingly, the due date for the second quarter estimates (June 15, 2020) has not yet been changed, creating a unique situation where the second quarter payments are due before the first quarter!
April 15 is also the deadline for other returns and tax-related actions items, and the Notice made clear that the extension applies only to federal income tax payments and filings. For example, the deadline for filing gift tax returns, which is also April 15, was not automatically extended. Thus, an extension must still be filed in order to delay the filing past April 15.
Contributions to certain retirement and savings plans can be made up to the deadline for filing income tax returns and still be treated as occurring in the prior year. In some cases, contribution deadlines are based on the income tax return due date, with extensions (e.g., contributions to SEPs), and in others, the deadlines don’t consider any extensions (e.g., contributions to IRAs and HSAs). The Notice answered a key question, namely that this pronouncement was a change in the filing deadline, rather than an automatic extension. Because the Notice created a new filing deadline of July 15, 2020, taxpayers should have until July 15 to make any of these contributions and still have them count toward the 2019 tax year.
The Massachusetts Department of Revenue has indicated that it is prepared to follow the IRS in offering relief for filing obligations, although no authoritative guidance has been given. The DOR is currently working on a plan to provide filing and payment relief.
News on COVID-19 is disseminating as rapidly as the projected spread of the virus, and there will likely be further guidance from the IRS and the Massachusetts DOR regarding these and other tax issues. We will issue further updates as written guidance is made available.
If you have questions about estate planning, probate, trusts, and tax matters, please contact one of Conn Kavanaugh’s experienced estate planning lawyers.
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