Member Article

On Wednesday, March 18, 2020, the Department of the Treasury issued Notice 2020-17, postponing payment deadlines for many taxpayers in order to grant some amount of relief to businesses and individuals amid the Coronavirus/COVID-19 crisis. The Notice provides many taxpayers with the ability to defer federal income tax payments otherwise due by April 15, 2020, but does not postpone or alter the April 15 filing deadline or estimated payments due June 15, 2020.

Notice Issued in Response to Emergency Determination

Notice 2020-17 was issued in response to the determination of President Trump, on March 13, 2020, that the COVID-19 pandemic is of sufficient severity and magnitude to warrant an emergency determination under section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act. As part of the emergency declaration, the President instructed Treasury Secretary Mnuchin to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency.

Applicable Payment Due Date

The Notice postpones the due date for the payment of Federal income taxes otherwise due April 15, 2020, on which 90 days, moving the date by which payment must be made to July 15, 2020. The postponed payment deadline applies to any Federal income tax payment otherwise due by April 15, including, income taxes owed for the 2019 tax year, quarterly estimated income tax payments for the 2020 tax year (specifically those due on April 15), and self-employment taxes.

Limits Placed on Deferrable Amount

The deferrable amount is limited to $10 million for any corporate taxpayer (i.e., C-Corporation or consolidated groups) and $1 million for any other taxpayer regardless of filing status. Accordingly, the deferrable amount limit for single individuals and married individuals filing jointly is identical.

Filing Deadline Unchanged

The postponed payment due date should not be confused with an automatic filing extension. Notice 2020-17 does not provide an extension of the April 15 filing deadline, nor does it mention any change to the availability or due date for filing an extension. Taxpayers with income tax returns or information returns due April 15, 2020, must still file a return or request an extension by that same date.

Calculation of Interest and Penalties

With respect to amounts properly deferrable under the Notice, the period of April 15 through July 15, 2020 will be disregarded for the calculation of interest and penalties on unpaid taxes. For all such unpaid taxes, interest and penalties will begin to accrue as of July 16, 2020.

Taxpayers who are subject to interest or penalties despite the relief granted by Notice 2020-17 may continue to seek reasonable cause relief for failure to pay tax under Section 6651 or a waiver of penalty for failure to pay estimated payments under Section 6654 (for individuals or certain trusts or estates). Relief for failure to pay estimated payments is not available for corporate taxpayers or tax-exempt organizations.

The Notice specifies that the period of April 15 through July 15, 2020 is only disregarded for purposes of calculating interest and penalties associated with “Federal income taxes postponed by this notice.” Accordingly, any currently overdue unpaid taxes will continue to accrue interest and penalties without suspension.

Only Applicable to Federal Taxes

It is important to remember that Notice 2020-17, which was issued by the U.S. Department of the Treasury, is not binding on state taxing authorities and that certain state income tax payments may continue to be due on April 15, 2020.

For more information regarding Notice 2020-17, Federal or state income tax return and information return filing deadlines and available extensions, or Federal or state income tax payment deadlines, please contact Tony Frasca (734-214-7614 or [email protected]), Michael Cumming (248-203-0740 or [email protected]), Tyler Kemper (734-214-7694 or [email protected]), or your Dykema relationship attorney.