Tax Law Insights

In response to the COVID-19 Coronavirus pandemic, Treasury Secretary Steven Mnuchin announced Tuesday that Americans will have until July 15th to pay their 2019 federal income taxes – and without late payment penalties or interest during this extended payment due date.  The IRS has now followed with the issuance of specific guidance in IRS Notice 2020-17.

Under the new IRS notice, any person with a Federal income tax payment due April 15, 2020, is affected by the COVID-19 emergency and is considered an “Affected Taxpayer”.

For an Affected Taxpayer, the due date for making Federal income tax payments due April 15, 2020, in an aggregate amount up to the Applicable Postponed Payment Amount, is postponed to July 15, 2020. The Applicable Postponed Payment Amount is up to $10,000,000 for each consolidated group (as defined in Treasury Regulation §1.1502-1) or for each C corporation that does not join in filing a consolidated return. For all other Affected Taxpayers, the Applicable Postponed Payment Amount is up to $1,000,000 regardless of filing status. For example, the Applicable Postponed Payment Amount is the same for a single individual and for married individuals filing a joint return. In both instances the Applicable Postponed Payment Amount is up to $1,000,000.

The relief provided in IRS notice is available solely with respect to Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020, in respect of an Affected Taxpayer’s 2019 taxable year, and Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an Affected Taxpayer’s 2020 taxable year.

No extension is provided in the IRS notice for the payment or deposit of any other type of Federal tax, or for the filing of any tax return or information return.

As a result of the postponement of the due date for making Federal income tax payments up to the Applicable Postponed Payment Amount from April 15, 2020, to July 15, 2020, the period beginning on April 15, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to pay the Federal income taxes postponed by this notice. Interest, penalties, and additions to tax with respect to such postponed Federal income tax payments will begin to accrue on July 16, 2020. In addition, interest, penalties and additions to tax will accrue, without any suspension or deferral, on the amount of any Federal income tax payments in excess of the Applicable Postponed Payment Amount due but not paid by an Affected Taxpayer on April 15, 2020.

Affected Taxpayers subject to penalties or additions to tax despite the relief granted in the IRS notice may seek reasonable cause relief under Internal Revenue Code Section 6651 for a failure to pay tax or seek a waiver to a penalty under internal Revenue Code Section 6654 for a failure by an individual or certain trusts and estates to pay estimated income tax, as applicable. Similar relief with respect to estimated tax payments is not available for corporate taxpayers or tax-exempt organizations under Internal Revenue Code Section 6655.