IRS Officially Announces Deferral of Payments for 90 Days

Following an announcement by Secretary of the Treasury Mnuchin on March 17, 2020, the IRS has released Notice 2020-17 (“Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic”).  The Notice provides tax relief for taxpayers with a federal income tax payment due April 15, 2020.

Specifically, postponed until July 15, 2020 are the following payment amounts: (i) up to $10,000,000 for each consolidated group or for each C corporation that does not join in filing a consolidated return; and (ii) for all other affected taxpayers, up to $1,000,000 regardless of filing status.  So, the postponed payment amount is the same for a single individual and for married individuals filing a joint return (up to $1,000,000 in each case).  If the tax payment due April 15, 2020 exceeds $10,000,000 or $1,000,000, as the case may be, the tax relief provided by this Notice should still apply. 

This relief is available solely with respect to federal income tax payments (including payments on self-employment income) due on April 15, 2020 in respect of a taxpayer’s 2019 taxable year and federal estimated income tax payments (including payments on self-employment income) due on April 15, 2020 for a taxpayer’s 2020 taxable year.  Note that the amount that can be postponed takes into account, in the aggregate, all tax payments just described.  The relief provided under the Notice does not cover estimated income tax payments due on June 15, 2020.

No extension is provided for the filing of any tax return or information return.  Also, no extension is provided for the payment or deposit of any other type of federal tax.

As relates to interest and penalties – the period beginning 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.  Accordingly, interest, penalties and additions to tax with respect to the postponed federal income tax payments will begin to accrue on July 16, 2020.  However, 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 postponed payment amount due but not paid on April 15, 2020. For example, if an individual taxpayer’s 2019 federal income tax and first quarter 2020 estimated income tax payment due on April 15, 2020 totals $1,500,000, the $500,000 in excess of the $1,000,000 cap would be subject to interest, penalties and additions to tax, without suspension or deferral, if the full $1,500,000 is paid on July 15, 2020.  On the other hand, if the individual’s total federal income tax and estimated income tax payment due on April 15, 2020 is $50,000, no interest, penalties or additions to tax would apply if that entire amount is paid on July 15, 2020. 

Under this Notice, taxpayers subject to penalties or additions to tax despite the relief granted (i.e., in connection with tax due in excess of the postponed payment amount) may seek reasonable cause relief for a failure to pay tax or, in the case of an individual or certain trusts and estates, may seek a waiver to a penalty for a failure to pay estimated income tax, as applicable.  Corporate taxpayers and tax-exempt organizations are not entitled under the Notice to seek a waiver to a penalty for failure to pay estimated income tax. 

We will keep you informed of further tax developments in respect of the coronavirus pandemic.