By the MSBA Tax Section Council
Updated 03/25/20 at 10:00 AM
As you are aware, COVID-19 has had innumerable impacts on our daily lives, and continues to do so with daily changes.
The implications are also being felt regarding the upcoming tax filing season, particularly for individuals and other taxpayers whose 2019 returns are otherwise due on April 15th.
Federal Impact. On Friday, March 20, 2020, the IRS announced changes for taxpayers in IRS Notice 2020-18 to the federal tax return filing and payment requirements otherwise due on April 15th and supplemented that Notice with FAQs published on March 24th: https://www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers.The IRS Notice provides an automatic extension for filing federal income tax returns and making tax payments with respect to the 2019 taxable year from April 15 to July 15. In addition, the IRS Notice also includes a similar automatic extension for estimated taxes for the 2020 taxable year that are otherwise due on April 15th until July 15th. No extension requests or forms (such as filing Forms 4868 or 7004) are needed to benefit from the Federal tax filing and tax payment postponements to July 15, 2020. Significantly, the IRS Notice applies to all types of taxpayers, including individuals, trusts, estates, partnerships, associations, companies and corporations. This means that all such taxpayers (individuals as well as the other entities) have a longer period within which (a) to file their Federal tax returns and (b) to pay their Federal taxes without penalties or interest. The IRS Notice also applies the announced extension to payments of tax on self-employment income with respect to the 2019 taxable year as well as to estimated payments due on such self-employment income for the 2020 taxable year.
Two cautions regarding the Federal extension under the IRS Notice: First, any Federal noncompliance after July 15 (e.g., failure to file or to pay tax due by that later date) will commence on July 16 with respect to the calculation of any penalties, interest, and additions to tax. Second, the IRS Notice says “No extension is provided in this Notice for the payment or deposit of any other type of Federal tax, or for the filing of any Federal information return.”
The FAQs (https://www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers) deserve very careful reading. Among other important clarifications made in them, the extension provided in Notice 2020-18 does not apply to any federal due dates other than April 15, 2020, does not provide any relief for payroll or excise taxes, does not apply to estate and gift taxes, does not apply to any filing any required information returns, and does not apply to second quarter (or later) payments of estimated taxes.
For more information and updates, please review IRS Notice 2020-18, the IRS Release dated March 21, 2020, https://www.irs.gov/newsroom/tax-day-now-july-15-treasury-irs-extend-filing-deadline-and-federal-tax-payments-regardless-of-amount-owed, the FAQs (https://www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers) and subsequent IRS publications and FAQs.
Minnesota Impact. With respect to the effect of COVID-19 on Minnesota tax compliance, the Minnesota Department of Revenue has on its website information specifically relating to the impact on taxes caused by this pandemic, https://www.revenue.state.mn.us/our-response-covid-19. Late Monday afternoon, the Department announced various changes to certain Minnesota tax filing and payment obligations. See the Department’s announcement: https://content.govdelivery.com/accounts/MNREV/bulletins/282c449. As a result of that announcement, the DOR has automatically extended the MN individual tax filing and tax payment date for the 2019 taxable year to July 15, 2020, without any penalties or interest. Minnesota taxpayers who expect refunds for taxable year 2019 are encouraged to file their returns “as soon as they are ready” as are those who do not need extra time to pay or file, even if they will owe taxes, for 2019. For individual taxpayers who cannot file their 2019 taxable year returns by July 15, 2020, they may request relief from other late filing and late payment penalties, and from any additional tax charges or interest, “for reasonable cause or the state of emergency declarations by the president and governor due to COVID-19” and may do so after being notified of a penalty by the DOR: See Penalty Abatement Information for Individuals.” Finally, and critically, the announcement makes it clear, however, that the filing/payment extension does not apply to individual estimated tax payments required for the 2020 taxable year.
With respect to non-individual tax filers and tax payments, the announcement makes clear that, first, there is no change to the required due date of April 15, 2020, for MN corporate franchise tax payments, though the announcement notes that under state law MN corporations “receive an automatic extension to file their state return to the later of November 15, 2020, or the date of any federal extension to file” and, second, comparably, the announcement does not change the due date of April 15, 2020, for MN partnerships, fiduciaries and S-corporations tax payments, though the announcement notes that these returns receive an automatic extension under state law “to file their state return [until] the date of any federal extension.” In other words, in both referenced cases of entity or non-individual tax return filing extensions provided under MN law, there is no delay or extension allowed for required tax payments by those filers – and the Minnesota announcement on March 23rd does not change the obligation of those persons to pay their required taxes on the due date, April 15th.
Lastly, the Department notes that it is “analyzing how other taxes may be impacted by this announcement and will communicate any additional changes by email and on our website,” so it is suggested that interested MN taxpayers and their preparers check the DOR website periodically for any new changes or information, or reach out to the Department directly by any of the contact methods included in the announcement or on the Department’s website.
Summary.The net result of the Federal and Minnesota tax filing and payment obligations as of now is that:
- Federal tax filing and tax payment obligations for all taxpayers due April 15th (for 2019 year returns and for estimated taxes due for the 2020 year) are automatically postponed to July 15, 2020.
- Federally, there is no limit on the amount of tax payments that may be postponed until July 15th and no extension forms need be filed to take advantage of this postponement.
- Minnesota individual taxpayers now have until July 15, 2020 to file and pay taxes for their 2019 taxable year.
- The Minnesota changes do not, however, apply to individual estimated taxes due on April 15, 2020 for the 2020 taxable year, or to the existing April 15th due dates for tax payments of MN corporate franchise or partnership, S-corporation or fiduciary income taxes, though extensions for those returns continue to be addressed under existing Minnesota law.
For other state tax filing and payment obligations, please look to those states’ tax websites or other official announcements from those tax authorities; do not assume that the Federal postponement announced in IRS Notice 2020-17 applies to any particular state’s tax filing or payment obligations.
Ken Levinson, klevinson@fredlaw.com
Masha Yevzelman, myevzelman@fredlaw.com