With the progression of COVID-19 in the US, the IRS and states have scrambled to provide relief to taxpayers. Over the past few weeks, each day has brought new developments. Most recently, the IRS has extended more deadlines and reversed stance on a deadline for international forms.
IRS Early Actions Were Problematic
Early actions were problematic because they extended some tax deadlines but not others. In a succession of COVID-19-related actions in March, the IRS:
- Extended the deadline for filing and payment of federal (not state) taxes from April 15th to July 15th for tax returns that normally have a due date of April 15th (IRS Notice 2020-18)
- Provided the same relief for filers of gift tax returns and payment of gift tax and generation-skipping (GST) tax (IRS Notice 2020-20)
- Released a set of Frequently Asked Questions (FAQs) about these notices
- While these actions extended IRS deadlines for 2019 individual tax returns and certain other items, they initially did NOT extend the deadlines for:
- State tax returns, state tax payments, and state quarterly estimated payments (each state has separately issued guidance on whether they have extended these)
- 2020 quarterly estimated tax payments due June 15, 2020
- Nonresident tax returns (Forms 1040NR), due June 15, 2020
- Certain informational forms that are typically filed as part of the Form 1040 individual income tax return, such as forms required to report ownership of certain foreign assets
- Various other tax returns and payments
It Initially Appeared Many International and Informational Forms Were Not Extended
When the IRS released the FAQs to clarify the items NOT extended, it appeared that many international and informational forms (usually included with the Form 1040) were NOT extended.
Under FAQ 10, the IRS specifically exempted informational reports from the extension relief. The tax practitioner community raised concerns with this FAQ as it could be interpreted to mean that international informational reports (Forms 3520, 5471, 5472, 8621, 8858, 8865, and 8938) that were tied to the individual income tax return were not included in the relief. Since the publication of these notices and FAQs, certain tax practitioners have adopted a conservative approach of filing the Form 4868 extension to extend the individual income tax return and in turn all associated international informational reports to October 15, 2020.
IRS Issues New Guidance
Fortunately, the IRS released new guidance on April 9 to extend the deadlines to file informational reports (a reversal of FAQ 10) and extend many other items, as well.
On April 9, 2020, the IRS published Notice 2020-23. Among other items, this new guidance extends the deadline for:
- IRS 2020 2nd quarter estimated tax payments originally due June 15 (now due July 15, 2020)
- Nonresident tax returns (Forms 1040NR) originally due June 15 (now due July 15, 2020)
- Domestic informational reports, such as Schedule H, for employers of household employees
- Elections that occur within the tax return, such as the 6013(g) and 6013(h) elections, to allow nonresidents to file jointly with resident spouses or as full-year residents
- International informational reports, such as Forms 3520, 5471, 5472, 8621, 8858, 8865, and 8938. These informational reports now have an extended due date of July 15, 2020.
The extension for international informational reports is a welcome relief for all taxpayers with these forms as part of their annual filing. Given the specter of the late filing $10,000 penalty for these forms, taxpayers affected by them should have a heightened sense of the timing for the annual return and ensure proper extensions are always filed as part of their due diligence. The new extended deadlines under Notice 2020-23 will also provide relief for any taxpayers who are identified later in the calendar year as meeting the requirements to file an international informational report who may not have been aware of the requirement.
The Wolf Group can assist you with any questions or concerns you may have with these notices and their applicability to your 2019 tax returns.