U.S. Tax Filing Deadline Extended to July 15

U.S. federal tax authorities extended tax filing deadlines to align with their previous extension of tax payment deadlines. State governments may or may not follow suit.

The U.S. Internal Revenue service extended the U.S. tax filing deadline to 15 July 2020 in response to widespread complaints that its earlier action extending the deadline for income tax payments to 15 July 2020 without also relaxing the filing deadline had created unnecessary confusion and insufficient relief. See Notice 2020-18, https://www.irs.gov/pub/irs-drop/n-20-18.pdf.

The new Notice also clarifies and expands the earlier extension of the payment deadline. For example, the original payment relief applied only to individual income tax payments less than $1 million, and corporate payments less than $10 million. Those limits have been eliminated.

According to IRS, the filing date for any federal income tax return due 15 April 2020 is automatically extended to 15 July 2020, and any payments due with such returns are also delayed until 15 July. In addition, the 15 April deadline for 2019 contributions to IRAs and Health Savings Accounts is also extended to July 15.

The effect on the June 15 deadline for filing second quarter estimated tax returns and paying the tax remains unclear. Tax professionals hold mixed opinions as to whether the new IRS Notice covers those second quarter requirements.

The filing extension notwithstanding, the Administration and tax professionals have urged taxpayers due to a refund to file their returns and receive their refunds.

The primary issue remaining is whether the states will conform to the extension. If they do not, there will be a confusing disconnect between state and federal deadlines, and taxpayers in some states will have to file state returns and pay state taxes even though they do not have to do so for federal taxes. This could be a particular problem for the mobility industry, with thousands of transferees and business travelers who have returns and taxes due in multiple states. Some states have already relaxed deadlines, but not in full conformity with the IRS notice. For example, California has extended the deadlines, but so far only to 15 June, and South Carolina to 1 June. Indiana, on the other hand, has already fully conformed to the federal deadlines. The expectation is that almost all states will eventually conform prior to the regular due date.

Finally, a giant economic relief package pending in the Senate would further extend the payment deadline to 15 October. Whether that provision will remain in any final legislation is unclear.