The Internal Revenue Service has taken various measures to provide tax relief during the coronavirus pandemic. The most recent initiatives includes giving taxpayers — both individuals and businesses — more time to file and pay their tax returns, providing individual retirement account rollover relief, and launching new filing tools.
The IRS announced in mid-April that taxpayers “generally had” until July 15, 2020, to file and pay federal income taxes originally due on April 15 — with no late-filing penalty, late-payment penalty or interest due.
Individuals, corporations and other entities (such as trusts and estates) now have been given until July 15 to make their 2019 payments, as well as their estimated quarterly tax payments for both the first and second quarters of 2020, without penalty.
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,” the agency explained. “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.”
Individuals needing extra time can request an extension to Oct. 15, 2020, though they must pay any taxes owed by July 15 to avoid interest and penalties.
CARES Act Updates
Also, the IRS issued guidance about tax relief tied to the $2.2 trillion stimulus package, also known as the Coronavirus Aid, Relief and Economic Security, or CARES act.
For taxpayers with net operating losses that are carried back, the IRS is:
• waiving the carryback period in the case of a NOL arising in a tax year starting after Dec. 31, 2017, and before Jan. 1, 2021;
• disregarding some amounts of foreign income subject to transition tax that normally would have been included as income during the five-year carryback period; and
• waiving or reducing a carryback period, or revoking an election to waive a carryback period, for a taxable year that started before Jan. 1, 2018, and ended after Dec. 31, 2017.
The IRS also extended the time to file Form 1045 or Form 1139 — with respect to the carryback of a NOL that arose in any taxable year that began during calendar year 2018 and that ended on or before June 30, 2019 — for six months.
Individuals, trusts and estates should file Form 1045, while corporations should complete Form 1139.
The IRS also issued Revenue Procedure 2020-23, allowing eligible partnerships to file amended partnership returns using Form 1065 (U.S. Return of Partnership Income), checking the “Amended Return” box and issuing amended Schedules K-1, Partner’s Share of Income, Deductions, Credits, to each of its partners.
(Partnerships filing such amended returns must write “FILED PURSUANT TO REV PROC 2020-23” at the top of their latest returns.)
The Treasury Department and IRS also launched a new web tool on IRS.gov that enables quick registration to receive Economic Impact Payments — also known as Recovery Rebates — faster and was designed to “help millions of people” who don’t usually file a tax return, they said.
The first stimulus checks hit eligible Americans’ bank accounts on April 13. The precise date of the payments will depend on how long individual banks typically take to process direct deposits.
“This process will repeat every week until all economic impact payments (EIPs) are processed,” according to House Ways and Means lawmakers The checks will be issued in reverse “adjusted gross income” order — starting with people with the lowest income first, the lawmakers said.
Treasury Secretary Steven Mnuchin tweeted the same that he expected more than 80 million Americans to get checks by direct deposit by April 15.
Treasury and IRS said that these payments are being automatically issued to eligible 2019 or 2018 federal tax return filers who received a refund using direct deposit.
Non-filers can get their payment faster by using the ‘Non-Filers: Enter Payment Info Here’ web portal and entering their bank account information.
To help everybody check on the status of their payments, the IRS is building a second tool, expected to be available for use by April 17. The “Get My Payment” tool will provide each person with the status of his or her payment, including the date their payment is scheduled to be deposited into their bank account or mailed to them.
An additional feature offered by the Get My Payment tool will give eligible people a chance to provide their bank account information so they can receive their payment more quickly rather than waiting for a paper check. However, that feature will be unavailable if the payment has already been scheduled for delivery, according to the IRS and Treasury Department.
“People who don’t have a return filing obligation can use this tool to give us basic information so they can receive their Economic Impact Payments as soon as possible,” according to IRS Commissioner Chuck Rettig.
60-Day IRA Rollovers Extended to July 15
As part of a larger relief package, the IRS extended on April 10 the 60-day rollover rule for individual retirement accounts until July 15, but only for distributions taken between Feb. 1 and May 15 of this year, explained IRA expert Ed Slott.
Unknown to most, the IRS in Notice 2020-23 — which extended several tax deadlines — “indirectly” included an extension of the 60-day rollover rule, said Slott in an email.
The CARES Act waived 2020 required minimum distributions, “but that wasn’t enacted until March 27,” Slott explained, “and by that time some people already took their IRA and plan RMDs.”
Now IRA holders “want to know if they can return (roll) those funds back to a plan or IRA and eliminate the tax bill,” Slott said. “Normally you can only do that if you are within 60 days of receiving that distribution, and the 60 days have already passed for those who took RMDs early in the year.”
But “If you took your RMD in January, you’re out of luck,” Slott said. “Also if you are a beneficiary, this relief does not apply since a non-spouse beneficiary cannot do a 60-day rollover.”
Further, the IRS relief “does not cover the once-per-year IRA rollover rule. If an IRA owner did any IRA-to-IRA rollover (or any Roth IRA to Roth IRA rollover) within the 365 days preceding the receipt of the RMD, they don’t qualify for this extension.”
It’s important to note also, Slott explains, that the once-per-year rule “does not apply to company plans, so if you took your RMD from a 401(k) for example, you can use this extension to roll it over to the plan or an IRA and eliminate the tax bill.”
If an individual took their RMD from an IRA, they “could use this extension to roll the funds over to a company plan (if you still have one), since the once-per-year rule does not apply to rollovers from IRAs or company plans or vice versa,” Slott said.
The relief also does not apply to Roth conversions. “So in some cases an unwanted IRA RMD that cannot be rolled over due to the once-per-year rule, can be converted to a Roth IRA, since the tax has to be paid anyway,” Slott explained. “This will provide relief for some (but not all) of those who took an RMD and now want to roll it back get rid of the tax bill.”
Slott added that he hopes the IRS will “provide more broad relief for these unwanted RMDs, but so far, this is all we have.”
Washington Bureau Chief Melanie Waddell can be reached at [email protected].—Jeff Berman and Janet Levaux contributed to this report.