Practitioners seek further clarity on tax filing, payment delay

In the wake of the IRS’s notice Friday postponing the April 15 due date until July 15 for federal income tax returns and income tax payments for 2019 tax years (Notice 2020-18), practitioners still had many concerns and questions about the deferral’s effects on related forms, elections, and other returns. The notice also deferred until July 15 estimated tax payments (including self-employment tax) for 2020 otherwise due April 15.

The fast-moving situation is still evolving as the government responds on several fronts to the coronavirus pandemic and its economic fallout, with only a little over three weeks remaining before the statutory filing deadline.

As the JofA reported on Saturday, the IRS issued the notice following Treasury Secretary Steven Mnuchin’s announcement that the July 15 due date would apply to the filing of income tax returns due April 15. Days earlier, in Notice 2020-17, the IRS deferred the due date for tax payments only, and taxpayer groups and practitioners including the AICPA pressed for postponement of filing as well. Notice 2020-18 supersedes Notice 2020-17.

Edward Karl, CPA, AICPA vice president–Tax Policy & Advocacy, said the AICPA was hearing from members with questions on how the postponement affects a wide range of return- and payment-related concerns that the AICPA will relay to the IRS.

“We started a running list of questions more than a week ago, of filing season concerns,” Karl said. “It’s up to about 130 items.”

For example, what if a taxpayer’s return has been e-filed with a bank debit authorization scheduled for April 15? Can the taxpayer change it to July 15? What if the draft is refused because of insufficient funds in the account? Normally, a penalty applies in such cases, but would it now, so long as the payment were made by July 15?

U.S. citizens and resident aliens living abroad or serving in the military outside the United States on the due date of their return generally have an automatic two-month extension, i.e., to June 15. Are their returns now due July 15 as well? Or later? Certain taxpayers with noncalendar fiscal years are also likely to be unsure of the notice’s effect.

And what effect, if any, does the postponement have on the due date for individual retirement account contributions? In addition, the coronavirus’s impact on the stock market has caused deep concern with the IRA minimum distribution rules.

The notice clearly states that it applies only to federal income tax payments and federal income tax returns due April 15 and only the first-quarter estimated taxes for 2020. But completing some other types of returns and forms, as well as federal income tax elections, often depend on calculations made in a return such as Form 1040, U.S. Individual Income Tax Return, or a business return, Karl pointed out. Will the IRS also extend relief in such cases?

“We’re living in unprecedented times,” Karl said. “We don’t have authoritative responses to many of the questions.”

It is the AICPA’s understanding that Treasury was preparing answers to frequently asked questions (FAQs) last week, based on the earlier Notice 2020-17, that had been expected by week’s end, Karl said. Instead, the IRS issued the superseding notice and likely will be issuing FAQs based on it, he said.

“We’re trying to get information, or to get the government to give out information, as quickly as possible,” Karl said.

For more news and reporting on the coronavirus and how CPAs can handle challenges related to the pandemic, visit the JofA’s coronavirus resources page.

— Paul Bonner (Paul.Bonner@aicpa-cima.com) is a JofA senior editor.