IRS extends more tax deadlines to cover individuals, trusts, estates corporations and others

To help taxpayers, the Department of Treasury and the Internal Revenue Service announced today that Notice 2020-23 extends additional key tax deadlines for individuals and businesses.

Last month, the IRS announced that taxpayers generally have until July 15, 2020, to file and pay federal income taxes originally due on April 15. No late-filing penalty, late-payment penalty or interest will be due.

Today’s notice expands this relief to additional returns, tax payments and other actions. As a result, the extensions generally now apply to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020. Individuals, trusts, estates, corporations and other non-corporate tax filers qualify for the extra time. This means that anyone, including Americans who live and work abroad, can now wait until July 15 to file their 2019 federal income tax return and pay any tax due.

Extension of time to file beyond July 15

Individual taxpayers who need additional time to file beyond the July 15 deadline can request an extension to Oct. 15, 2020, by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004. An extension to file is not an extension to pay any taxes owed. Taxpayers requesting additional time to file should estimate their tax liability and pay any taxes owed by the July 15, 2020, deadline to avoid additional interest and penalties.

Estimated Tax Payments

Besides the April 15 estimated tax payment previously extended, today’s notice also extends relief to estimated tax payments due June 15, 2020. This means that any individual or corporation that has a quarterly estimated tax payment due on or after April 1, 2020, and before July 15, 2020, can wait until July 15 to make that payment, without penalty.  

For 2016 tax returns, the normal April 15 deadline to claim a refund has also been extended to July 15, 2020. The law provides a three-year window of opportunity to claim a refund. If taxpayers do not file a return within three years, the money becomes property of the U.S. Treasury. The law requires taxpayers to properly address, mail and ensure the tax return is postmarked by the July 15, 2020, date.

2016 unclaimed refunds – deadline extended to July 15

For 2016 tax returns, the normal April 15 deadline to claim a refund has also been extended to July 15, 2020. The law provides a three-year window of opportunity to claim a refund. If taxpayers do not file a return within three years, the money becomes property of the U.S. Treasury. The law requires taxpayers to properly address, mail and ensure the tax return is postmarked by the July 15, 2020, date.

10 things to know about IRS operations during the coronavirus pandemic:

These are truly trying times for everyone. For the Internal Revenue Service, our nation’s tax (and now stimulus) administrator, times are about to get even more hectic.

The IRS is in the middle of a perfect storm. It’s in the midst of a busy filing season — with about 70 million individual tax returns still to be processed (as of March 20) for the 2020 tax year. The IRS is doing this work with about 20,000 less employees that it had 10 years ago. Now, with the passage of the CARES Act and other COVID-19 assistance laws, the IRS will have one of the most important and urgent jobs in our country: distributing many of the benefits in the stimulus package, including determining and distributing stimulus payments. It will also have to make significant changes to its returns processing and operations to account for all of the Tax Code relief changes found in the many new coronavirus relief provisions.

This perfect storm requires the IRS to make significant adjustments to the way it does business. Until the COVID-19 epidemic is well behind us, the IRS will be doing its best to conduct business as usual while helping taxpayers by administering many of the recently passed COVID-19 relief provisions. For example, the IRS is urgently working on building remote work capability for many of its 70,000-plus employees — most of whom usually work from IRS locations and offices throughout the country. This transition will take some time in order to return to normal operations. In some cases, operations will not return to normal until well after the pandemic is over.

The IRS does have some experience in providing stimulus payments to taxpayers from the 2001 and 2008 recovery programs. However, the COVID-19 relief provisions are not as simple as the 2001 and 2008 programs — and they need to be implemented much more quickly than prior relief efforts.

For taxpayers and tax professionals, interacting with the IRS during the pandemic will be much different than normal. Here are 10 important things you should expect from IRS operations and interacting with the IRS until our country gets back to normal:

  1. IRS.gov is the first place to answer your questions.

IRS Operations, even under normal operations, cannot handle a flood of stimulus payment questions. Taxpayers should first look to the IRS’s coronavirus news and updates at IRS.gov/coronavirus. Critical future updates will be posted on the website — and most of taxpayers’ questions will be addressed on that site. For example, the webpage recently announced IRS plans to soon provide an online tool that will allow taxpayers to provide their bank account information (if the IRS does not have it already) for direct deposit of the stimulus payment. Many taxpayers are trying to call the IRS (and not getting an answer) to get stimulus payment answers when the best update will come from the IRS’s coronavirus webpage.

  1. Live assistance is very limited.

IRS phone lines are likely to be down for several weeks and Taxpayer Assistance Centers are closed indefinitely. Many IRS hotlines are not operational. This includes most service and all compliance hotlines (i.e., automated underreporter, collection functions, correspondence exams, etc.). Tax professional phone assistance through the Practitioner Priority Service line and local Taxpayer Assistance Centers is also unavailable. Taxpayers and tax professionals should not fear missed deadlines or enforcement activity, as the IRS has suspended almost all compliance activity (audits, collection, etc.) through July 15. The message here from the IRS is that we all can wait until July 15 to sort out any issues.

  1. The IRS will be hard to reach, even after the pandemic is over.

As in the “Great Shutdown of 2019,” the backlog of people needing to contact the IRS, taxpayer correspondence, and tax season filing issues will consume many of the IRS’s resources well after the pandemic is over. The IRS is planning to provide other means of submitting documents to the IRS (i.e., by use of email or increased access to the IRS by new e-fax lines). However, the IRS will still have a mountain of correspondence and clogged phone lines after normal operations resume.

  1. You can put that audit on hold — unless it deals with a refund hold situation.

The IRS announced, in its “People First Initiative,” that all new audits are suspended — and will be scheduled to resume after July 15. However, it is realistic to expect the IRS to use its audit power to stop suspicious or erroneous refunds. Taxpayers with questionable refunds (e.g., Earned Income Tax Credit returns, returns with highly questionable items, suspected identity theft returns, wage verification issues) will likely see IRS filing filters stopping their refunds until the taxpayer can verify the return. These refund freeze audits should continue to occur and be a source of taxpayer frustration as taxpayers will not be able to get an immediate response from the IRS until operations return to normal. Taxpayers with a hardship may seek immediate assistance from their local Taxpayer Advocate Service office.

  1. If you owe back taxes, you have a temporary reprieve.

IRS Collection enforcement is halted through July 15. Also, as a part of the People First Initiative, all liens, levies and passport restrictions are put on hold. IRS processing of pending collection alternatives, including offers in compromises, are on hold through July 15. Taxpayers can still go online to the IRS’s Online Payment Agreement tool if they want to set up a new payment plan on a balance owed.

  1. IRS will not require your monthly installment agreement payment.

The IRS announced in its “People First Initiative” that taxpayers are not required to make a monthly payment, from April 1 through July 15, on an established IRS installment agreement. Taxpayers who make payments by check will simply not make their payments during this time — and the IRS will not “default” their agreement. However, if you pay by direct debit through your bank account, you may be out of luck. The IRS initially stated that taxpayers should contact their bank to stop the drafted payment. Most banks have stated that they cannot stop the draft and taxpayers need to contact the IRS directly to void the draft.

Taxpayers are in a pickle: IRS phone lines are closed, so taxpayers cannot contact the IRS to “skip” the automatic payments during this time. Also, the IRS is not automatically suspending direct debit payments. The IRS has not provided any guidance on how it will enable taxpayers to initiate a skip on their scheduled drafted payments. More to come on this issue (see IRS.gov/coronavirus). Again, taxpayers with a hardship should contact the local Taxpayer Advocate for help in skipping automatic payments.

  1. IRS Transcripts are usually your best method to answer to account-related questions.

Many “account-related” questions can be answered by reviewing IRS transcripts. Prior AGI, amount of estimated tax payments made, and amount of penalties assessed are examples of common questions that can be answered on an IRS account transcript. Taxpayers can also get a copy of their last three years tax returns (an IRS tax return transcript) and their W-2s/1099s for the past 10 years (an IRS wage and income transcript). Taxpayers can access these transcripts immediately by setting up an IRS online account and using the IRS “Get Transcript” tool. Taxpayers can also call the automated “Get Transcript” hotline and order their transcripts to be delivered to their address on record with the IRS.

  1. TAS can be reached if you have a hardship — but you must call your local office.

This includes taxpayers who have a refund hold and are experiencing a financial hardship. The TAS Central hotline is closed — but taxpayers can contact their local advocate by phone. A list of the TAS can be found here: https://www.irs.gov/advocate/local-taxpayer-advocate.

  1. The IRS is still processing tax returns and it is best to file as soon as possible.

Most stimulus payments will be determined from filed 2019 returns (or 2018, if 2019 is not yet filed). It is a good time to file required back tax returns, especially for those who have not filed a 2018 and 2019 return. These returns can be e-filed and accepted in a day. The IRS also announced that those who do have not needed to file in the past may need to do so to obtain a stimulus payment. Per the IRS: “IRS.gov/coronavirus will soon provide information instructing people in these groups on how to file a 2019 tax return with simple, but necessary, information including their filing status, number of dependents and direct deposit bank account information.”

  1. IRS tax collectors will not grab the stimulus payment to pay past tax debt.

As part of the stimulus relief, the IRS will not apply the amount of the stimulus payment against any balances owed. There is one exception when the IRS will take the taxpayer’s stimulus payment: to pay a taxpayer’s delinquent child support obligations. Otherwise, all taxpayers, regardless of whether they owe tax debt or not, will receive their stimulus payment.

Taxpayers should also know that although IRS operations are administering the stimulus payments, they do not make the rules on who gets relief and how much is paid. Congress, in the various laws enacted, makes these rules. As in any law, there can be some that are left out. For example, many college students who are dependents of their parents will not see most direct benefits from the stimulus packages. Taxpayers with comments about the CARES Act and other enacted laws should direct them to their elected officials, not the IRS.

Education tax benefits may help you with college costs

Please be reminded that if you are paying higher education costs for yourself, a spouse or a dependent, you may be eligible to save some money with education tax credits or the Tuition and Fees Deduction. Here are some facts about tax credits for higher education:

The American Opportunity Tax Credit (AOTC) is:

  • Worth a maximum benefit up to $2,500 per eligible student.
  • Only for the first four years at an eligible.
    educational or vocational institution.
  • For students pursuing a degree or other recognized education credential.
  • Partially refundable. Taxpayers can potentially get up to $1,000 back.

The Lifetime Learning Credit (LLC) is:

  • Worth up to $2,000 per tax return, per year, no matter how many students qualify.
  • Available for all years of postsecondary education and for courses to acquire or improve job skills.
  • Available for an unlimited number of tax years.

Remember, to claim the AOTC or LLC, as a taxpayer, you must use Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits). Additionally, if you claim the AOTC, the law requires you to include the school’s Employer Identification Number on this form.

If you do not qualify for the AOTC or LLC, you may still benefit from the Tuition and Fees Deduction:

  • You may be able to deduct qualified education expenses paid during the year for yourself, your spouse, or your dependent(s).
  • The qualified expenses must be for higher education.
  • You cannot claim this deduction if your filing status is married filing separately or if another person can claim you as a dependent on their tax return.
  • The Tuition and Fees Deduction can reduce the amount of your income subject to tax by up to $4,000. This means you can claim this deduction even if you don’t itemize deductions on Schedule A (Form 1040).
  • To be eligible to claim the Tuition and Fees Deduction, American Opportunity Tax Credit or Lifetime Learning Credit, the law requires you (or your dependents) to have received a Form 1098-T,Tuition Statement, from an eligible educational institution. There are exceptions for some students.

For a complete explanation of all education benefits, read IRS Publication 970, Tax Benefits for Education.

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