Overview of relief provided by Notice 2020-23
TAX ALERT |
On April 9, 2020 the IRS issued Notice 2020-23 which extends additional key tax deadlines for individuals and businesses during the COVID-19 emergency. Notice 2020-23, in the words of the IRS, “amplifies” the previously released Notice 2020-18 (March 18, 2020) and answers to Frequently Asked Questions to Notice 2020-18, as well as Notice 2020-15 IRB 590 (April 6, 2020), and Notice 2020-20, 2020-16 IRB 660 (April 13, 2020). While the previous notices generally extended until July 15, 2020 the time to file and pay federal income taxes originally due on April 15, 2020, Notice 2020-23 now expands this relief to additional returns, tax payments and other actions. The extensions generally now apply to all taxpayers that “have a filing or payment deadline on or after April 1, 2020, and before July 15, 2020.” The ability for taxpayers who need additional time to file beyond the July 15 deadline to request an extension to Oct. 15, 2020 remains in place.
Notice 2020-23 also extends the relief provided for making estimated tax payments to taxpayers with an estimated payment due June 15, 2020. This also means that any individual or corporation that has a quarterly estimated tax payment due on or after April 1, 2020 and before July 15, 2020, can wait until July 15 to make that payment, without penalty.
The Notice specifically highlights certain taxpayers for which the April 1 to July 15, 2020 extended payment and filing relief (to July 15, 2020) applies. Those specifically listed, for clarity, are:
- Individuals who need to make income tax payments or file a Form 1040 Series return;
- Corporate taxpayers on a fiscal or calendar year end that need to make tax payments or file a Form 1120 Series return;
- Partnerships on a fiscal or calendar year that need to file a Form 1065 or Form 1066 return;
- Estates or Trusts that need to make income tax payments or file a Form 1041 Series return;
- Estates that need to make generation-skipping transfer tax payments or file a Form 706 Series return;
- Taxpayers that need to make gift and generation-skipping transfer tax payments and file Form 709;
- Taxpayers that needs to make tax payments of principal or interest due as a result of an election made under sections 6166, 6161 or 6163 and submit annual recertification requirements under section 6166 of the Code;
- Exempt Organizations that file Forms 990-T, 990-PF or 4720;
- Taxpayers that need to make quarterly estimated tax payments with calculated on or submitted with Form 990-W, 1040-ES, 1040-ES (NR) and 1120-W;
As a reminder, any filing due with a return is extended. This includes many international information returns like Forms 5471, 5472, 8621, 8858, 8865 and 8938.
The notice also expands the definition of an “affected taxpayer” qualifying for this relief to include “any person” performing a “time sensitive action” listed in either Reg. Section 301.7508A-1(c)(1)(iv) – (vi) or Rev. Proc. 2018-58, 2018-50 IRB 990 (Dec. 10, 2018), which is due to be performed on or after April 1, 2020, and before July 15, 2020.
Rev. Proc. 2018-58 became effective on Nov. 20, 2018, and provides a list of “time-sensitive acts”, the performance of which may be postponed for taxpayers under section 7508 and 7508A of the Internal Revenue Code. The list of time-sensitive acts stated in Rev. Proc. 2018-58 supplements the list of postponed acts that is already stated in Reg. Section 301.7508A-1(c)(1)(vii) (which include the specifically listed relief provided in Notice 2020-23, like the time for filing a tax return, paying tax due or making elections on a return). For purposes of the COVID-19 emergency, some of notable, supplemental “time-sensitive act” topics listed in Rev. Proc. 2018-53 for which the IRS can postpone the normally required deadline include:
- “Any act relating to the adoption, election, retention or change of any accounting method or period, or the use of an accounting method or period that is required to be performed on or before the due date of a tax return (including extensions).”
- A taxpayer who wishes to make certain elections regarding carrybacks under section 172(b), generally (see multiple subsection), which are due by the date of the taxpayer’s federal income tax return (including extensions).
- The deadline under section 1382(d) for an organization required to pay a patronage dividend.
- The deadline under section 1388(j) for cooperative organizations to give notice to its patrons that the cooperative is exercising its option to net patronage gains and losses.
- The requirement that the effective date of an entity classification made on Form 8832 cannot be more than 75 days prior to the date the election is file.
- The six month automatic extension under section 301.9100-2(b-d) for making certain regulatory or statutory elections whose due dates are the due date of the return including extensions.
- A multitude of corporate timing issues like distributions to shareholders, liquidations, section 1.336-2(h) elections, section 338 acquisitions (Please refer to section 7 of the Rev. Proc. 2018-58 on CORPORATE ISSUES).
- Specifically, the requirement that corporations filing Form 4466 must file “on or before the 15th day of the third month after the taxable year or before the date the corporation first files its income tax return for such year, whichever is earlier.”
- Certain distributions and contributions from retirement plans (Please refer to section 8 of the Rev. Proc. 2018-58 on EMPLOYEE BENEFIT ISSUES).
- The filing deadline for Form 5500 Series.
- Deadlines for trusts to make certain elections (See section 9, ESTATE, GIFT AND TRUST ISSUES)
- The filing period for Form 5227, Split-Interest Trust Information.
- The filing period for the executor of a decedent’s estate to file Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return.
- The time period for an organization seeking exemption under 501(c)(9) to file Form 1024, Application for Recognition of Exemption Under Section 501(a).
- The deadline for filing the Form 990 Series (Please refer to section 10, EXEMPT ORGANIZATION ISSUES).
- The deadline for filing Forms 1041-A, U.S. Information Return Trust Accumulation of Charitable Amounts.
- The filing deadline for the Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts.
- The time period for revoking a section 754 election (Please refer to section 13, PARTNERSHIP AND S CORPORATION ISSUES).
- The time period for a trustee of an electing small business trust (ESBT) to file the ESBT election
- The effective date for which an S corporation can elect to treat an eligible subsidiary as a qualified subchapter S subsidiary (QSUB). Alternatively, the effective date for revoking a QSUB election.
- The 30 day period for requesting a Collection Due Process (CDP) administrative hearing
- The time period under section 6411 and section 1.6411-1(c) for Taxpayers applying for a tentative carryback adjustment of the tax for the prior taxable year to file Form 1139, Corporation Application for Tentative Refund, (for corporations) or Form 1045, Application for Tentative Refund, (for entities other than corporations) after the end of such taxable year that generates such net operating loss, net capital loss or unused business credit from which the carryback results. (Please refer to section 14, PROCEDURE & ADMINISTRATION ISSUES, .03 Miscellaneous).
- This Rev. Proc. provides special rules for section 1031 Like-Kind Exchange Transactions (Please see section 17).
This bulleted list provides a broad sampling of the time-sensitive acts listed in Rev. Proc. 2018-58. Since this list is supplement please also review IRC Section 7508A-1(c). Rev. Proc. 2018-58 is 139 pages and the list of “time-sensitive acts” it covers to supplement IRC Section 7508A-1(c)(1)(vii) begins on page 9 and ends on page 138. The applicable code sections are listed on the left hand side.
However, please note that Rev. Proc. 2018-58 does not, by itself provide for a postponement. Instead the IRS must issue a notice or publish guidance (e.g. news release) with respect to a federally declared disaster “authorizing the postponement of acts described in this revenue procedure, that defines which taxpayers are considered “affected taxpayers,” and describes the acts postponed, the duration of the postponement, and the location of the covered disaster area.” With Notice 2020-23, the IRS has provided the requisite Notice to postpone the performance of time sensitive actions listed in in Reg. Section 301.7508A-1(c)(1)(iv) – (vi) and Rev. Proc. 2018-58. Therefore, please also review the list in Notice 2018-15 to see whether additional relief is available beyond the relief for specific taxpayers stated in Notice 2020-23.
To reiterate, the relief provided for in Notice 2020-23 is automatic, and the IRS would like everyone to know that any taxpayer that falls within these filing parameters is an “Affected Taxpayer” for purposes of this relief. Therefore, taxpayers do not have to call the IRS, write to the IRS or file any extensions or any other documents to request this relief. IRS operations are also affected by the COVID-19 emergency. Accordingly, the IRS has additionally expanded its relief to include those “Affected Persons,” who are currently under examination, those who have a claim for refund for tax year 2016 whose statute will expire, those who file written documents described in IRC section 6501(c)(7) (amended returns) or submit payments with respect to a tax for which the time for assessment would otherwise expire during the period of April 1 to July 15, 2020.
We have linked to specific topic area alerts throughout this article. Please contact the authors of this alert or any of the other alerts if you have questions regarding the applicability of this notice.