On March 20, the IRS issued Notice 2020-18 announcing that federal income tax payments and payments due on April 15 may be deferred until July 15. Notice 2020-18 supersedes Notice 2020-17, issued just two days earlier. States are quickly aligning with the IRS’s extension of time, with California already adopting similar relief. The relief is intended to ease an imminent payment burden and create liquidity, but high income individual taxpayers may disproportionately benefit from the deferral because they are most likely to pay final 2019 and 2020 estimated tax payments on April 15, whereas a large proportion of individual taxpayers actually receive refunds after filing their returns.
Notice 2020-18 defers federal income (and self-employment) tax payments and returns due April 15 until July 15. Both 2019 final payments and 2020 estimates are covered, and the deferral applies to all taxpayers, regardless of amount due.
The payment extension may require updates to existing tax software, and no specific guidance is provided for taxpayers currently on a payment plan.
On March 18, the California Franchise Tax Board (FTB) updated its existing 60-day extension of time to 90 days, matching the IRS’s extended deadline of July 15. California’s extension relief applies to both the filing of tax returns and tax payments. The extension broadly applies to individuals and any business entities with a California return or payment due between March 15 and July 15 (including corporations, S-Corporations, LLCs, partnerships, and other entity types with returns or payments due during this period) without the need to claim any special treatment or to call FTB to qualify. Like the IRS, the deferral applies to any tax liability amount, i.e., there is no cap. For those taxpayers requiring additional time beyond July 15, 2020, to file their California tax returns, California’s normal six- and seven-month automatic filing extension periods remain the same. For example, for individuals and most calendar year partnerships, the six-month automatic filing extension date is October 15, 2020, while for calendar year corporations, the seven-month automatic filing extension date is November 15, 2020 (see FTB Notice 2019-7 regarding California’s new seven-month automatic extension of time for corporations for taxable years beginning on or after January 1, 2019). The FTB has prepared a comprehensive list of original and extended due dates based on return type for calendar year and fiscal year filers. Finally, the FTB has established a COVID-19 FAQ page that will continue to be updated with guidance.
On March 18, Maryland also announced an income tax payment extension to July 15 for business and individual income taxpayers. The extension does not apply to return filings.
On March 19, Indiana announced it would be following the IRS’s extended deadline. Individual tax returns and payments, along with estimate payments originally due by April 15, 2020, are now due on or before July 15, 2020. Corporate tax returns and payments, along with estimated payments originally due by April 15 or April 20 are now due on or before July 15, 2020. Those originally due on May 15, 2020, are now due on August 17, 2020.
While Connecticut extended its individual income tax filing and payment deadline to July 15, 2020 like the IRS, its corporation business return filing and payment date was only extended by 60 days to June 15 and its pass-through entity return filing date was only extended to April 15 with an extended payment date to June 15. Similarly, South Carolina extended its deadline by only 60 days to file tax returns and make tax payments for individuals and businesses impacted by COVID-19. Finally, North Carolina extended its income tax payment date to July 15, 2020, for most individuals and businesses. The extension does not apply to filing income tax returns, which are still due April 15. Note: North Carolina law prevents the North Carolina Department of Revenue from waiving any interest and therefore only penalties are waived (not interest) for tax payments made after April 15 and no later than July 15.
The impact of COVID-19 on federal and state income tax filings and payments is a rapidly developing area. The Pillsbury Federal Tax and SALT Team stands ready to assist your company during this critical time. For more information, contact us here.
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