COVID-19 Outbreak Tax Developments
Treasury and IRS Issue Guidance on Tax-Paying and Tax-Filing Due to COVID-19 Outbreak
On March 13, 2020, President Trump issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act in response to the ongoing Coronavirus Disease 2019 (COVID-19) pandemic (“Emergency Declaration”). The Emergency Declaration instructed the Secretary of the Treasury “to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate, pursuant to 26 U.S.C. 7508A(a).”
Pursuant to the Emergency Declaration, the IRS has issued Notice 2020-17, the purpose of which is to provide relief under Section 7508A(a) of the Internal Revenue Code for certain persons that the Secretary of the Treasury has determined to be affected by the COVID-19 emergency.
Section 7508A provides the Secretary of the Treasury with the authority to postpone the time for performing certain acts under the internal revenue laws for a taxpayer determined by the Secretary to be affected by a Federally declared disaster. A period of up to one year may be disregarded in determining whether the performance of certain acts is timely under the internal revenue laws.
Under the Notice, the Secretary has determined that any person with a Federal income tax payment due April 15, 2020, is affected by the COVID-19 emergency for purposes of the relief described under the Notice (an “Affected Taxpayer”).
For an Affected Taxpayer, the due date for making Federal income tax payments due April 15, 2020, in an aggregate amount up to the “Applicable Postponed Payment Amount,” is postponed to July 15, 2020. The Applicable Postponed Payment Amount for consolidated groups and C corporations that do not join in filing a consolidated return is $10,000,000. For all other Affected Taxpayers, the Applicable Postponed Payment Amount is $1,000,000, regardless of filing status. Thus, for both single individuals and married individuals filing a joint return, the amount that may be postponed to July 15, 2020 is $1,000,000.
The relief provided under the Notice is available solely with respect to Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020, relating to an Affected Taxpayer’s 2019 tax year, and Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, relating to an Affected Taxpayer’s 2020 taxable year.
As a result of the postponement under the Notice, 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 the Notice. Interest, penalties, and additions to tax with respect to such postponed Federal income tax payments will begin to accrue on July 16, 2020. In addition, 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 Applicable Postponed Payment Amount due but not paid by an Affected Taxpayer on April 15, 2020.
No extension is provided under the Notice for the payment or deposit of any other type of Federal tax, or for the filing of any tax return or information return. However, Treasury Secretary Steven Mnuchin announced on March 20, 2020 that the April 15 deadline for filing tax returns will be postponed until July 15, 2020. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.
New Jersey Supreme Court Extends Tax Appeal Filing Deadlines
Recognizing the unprecedented closures and cancellations throughout New Jersey because of the State of Emergency and Public Health Emergency declared to address the COVID-19 coronavirus public health crisis, the New Jersey Supreme Court extended the tax filing deadlines in local property tax and state tax appeals. However, the Supreme Court action does not affect New Jersey income tax filings and at this point there has been no guidance from New Jersey yet as to whether the income tax paying and income tax return filing deadlines will be extended to coincide with the federal extensions.
- Local Property Tax Appeals
Regarding local property tax appeals, the time to file a complaint or counter-complaint with a County Board of Taxation or the New Jersey Tax Court is extended to the later of May 1, 2020 or 30 days following a determination by the Governor that the State of Emergency has ended. The extension does not apply to deadline which expired before March 19, 2020.
- State Tax Appeals
The Court has also extended the time for filings with the New Jersey Tax Court and regarding administrative appeals. Generally, appeals to the Tax Court must be filed within 90 days of the action of the New Jersey Division of Taxation for which review is sought. Similarly, administrative protests must be filed within 90 days of an assessment or finding of the Division. The filing date for all state tax appeals is extended to the later of May 1, 2020 or 30 days following a determination by the Governor that the State of Emergency has ended. The extension does not apply to deadline which expired before March 19, 2020.