Recent IRS Notices Extend Many Tax-Related Deadlines

Notices 2020-17, 2020-18

In March, the IRS issued Notice 2020-18, which officially gives taxpayers until July 15, 2020, to file federal income tax returns and make required tax payments. An Executive Order issued March 20, granted the tax filing extension as a result of the coronavirus (COVID-19) emergency. Issued before the Executive Order, IRS Notice 2020-17 had granted a deadline extension to July 15, 2020, to make required tax payments, but not to file tax returns.

The scope of individuals and entities covered by the newest relief is sweeping. Notice 2020-18 states that “any person with a federal income tax payment or a federal income tax return due April 15, 2020, is affected by the COVID-19 emergency for purposes of the relief.” Further, “…’person’ includes an individual, a trust, estate, partnership, association, company or corporation…” 

No special form must be filed to request the filing extension (e.g., IRS Forms 4868 or 7004), and there is no limitation on the amounts of tax owed, including self-employment tax or estimated tax payments, the payment of which can be delayed to July 15, 2020. Notice 2020-18 further states that “no extension is provided in this notice for the payment or deposit of any other type of federal tax, or for the filing of any federal information return.” 

After issuing Notice 2020-18, the IRS updated the frequently-asked-question (FAQ) information at its website, confirming that IRA, health savings account (HSA), and certain retirement plan contributions otherwise due by April 15, 2020, can be made as late as July 15, 2020. The posting of these new FAQ items, numbers 17, 20, and 21, aligns with the three-month tax return filing deadline extension in Notice 2020-18.

Notice 2020-23

On April 10, 2020, the IRS issued another notice, Notice 2020-23, which expands the range of time-sensitive, tax-related actions whose completion can be delayed to July 15, 2020. Unlike the extensive retirement plan-related relief within the Coronavirus Aid, Relief, and Economic Security (CARES) Act, individuals or entities wishing to avail themselves of the extensions provided in IRS Notice 2020-23 need not meet any condition of being directly or indirectly affected by the COVID-19 pandemic.

Notice 2020-23 identifies actions eligible for the extended deadline as any that are described in Revenue Procedure 2018-58 and have a deadline falling on or after April 1, 2020, and before July 15, 2020.

Included are the following actions pertaining to retirement plans, IRAs, HSAs, and Coverdell education savings accounts (ESAs). Note that some actions are to be completed by individuals, while others are the retirement plan’s or financial organization’s responsibility.

Employer-Sponsored Retirement Plans

Contributions

  • Make retirement plan contributions—including simplified employee pension (SEP) and savings incentive match plan for employees of small employers (SIMPLE) IRA contributions—for the preceding taxable year by the tax filing deadline, including filing extensions (addressed in previous guidance)

  • Make a retirement plan loan payment, taking into account, if applicable, any cure period

  • Complete an indirect (60-day) rollover to an eligible retirement plan

Distributions

  • Distribute 402(g) excess deferrals, adjusted for earnings (normal deadline is April 15)

  • Distribute deferrals, adjusted for earnings to satisfy 401(k) ADP testing requirements

  • Distribute employer matching or employee nondeductible amounts, adjusted for earnings, to meet ACP testing requirements

  • Distribute nondeductible employer contributions to avoid the 10 percent penalty tax

  • Distribute excess contributions (ADP testing) and excess aggregate contributions (ACP testing), plus earnings by the deadline to avoid imposition of an additional 10 percent penalty tax

  • Take an initial required minimum distribution (RMD) from a retirement plan by April 1 of the year following the first RMD year (the CARES Act waived all RMDs due in 2020)

  • Distribute excess qualifying longevity annuity contract (QLAC) premiums by the last day of the calendar year following the year the premium was paid

  • Begin distributions under a QLAC no later than the first day of the first month after the participant reaches age 85

  • Elect a permissible withdrawal under a 401(k) eligible automatic contribution arrangement (EACA)

  • Distribute a substantially equal periodic payment from a retirement plan

Other Plan Operations

  • File a plan’s annual return in the Form 5500 series (if its deadline falls within the April 1 through July 15 extension period)

  • Self-correct retirement plan operational failures by the last day of the second plan year following the plan year in which the failure occurred (certain failures excepted)

  • Qualify by the Voluntary Correction Program (VCP) submission deadline to use alternate calculation of plan assets (for a plan that is not required to file a Form 5500 series return)

  • Restate a retirement plan by the close of its remedial amendment period (because earlier guidance extended defined benefit plan deadlines to July 31, 2020, this provision applies only to 403(b) plan deadlines that were previously extended to June 30, 2020)

  • Designate a nonspouse QLAC beneficiary by the annuity starting date 

IRAs

Contributions

  • Make a contribution to an IRA (addressed in previous guidance)

  • Complete a 60-day rollover to an IRA or other eligible retirement plan

  • Roll over a retirement plan loan offset amount to an IRA by the recipient’s tax return deadline (addressed in previous guidance for 2019 offsets with recipient 2020 tax return deadlines)

  • Complete a rollover (within 120 days) or use distributed funds to qualify for the first-time-homebuyer exception to the 10 percent early distribution penalty tax

  • Recontribute to an IRA a qualified reservist distribution (normal deadline is two years after end of active duty)

  • Roll over a wrongful IRS levy to an IRA or eligible retirement plan by the recipient’s tax return due date, not including extensions

Distributions

  • Take an initial RMD from an IRA by April 1 of the year following the first RMD year (the CARES Act waived all RMDs due in 2020)

  • Distribute an excess IRA contribution, with net income attributable, by the individual’s tax return due date, including extensions

  • Distribute a substantially equal periodic payment from an IRA

  • Begin distributions under a QLAC no later than the first day of the first month after the participant reaches age 85

  • Distribute excess QLAC contract premiums by the last day of the calendar year following the year the premium was paid

Operations and Miscellaneous

  • Provide IRS Form 5498, IRA Contribution Information, to the IRS and an account statement to the IRA owner (normal deadline is May 31)

  • Designate a nonspouse QLAC beneficiary by the annuity starting date

HSAs

  • Complete a 60-day rollover to another HSA

  • Provide IRS Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, to the IRS and an account statement to the HSA owner (normal deadline is May 31)

ESAs

Contributions

  • Make an ESA contribution (normal deadline is tax return due date, not including extensions)

  • Complete a 60-day rollover to another ESA

  • Provide IRS Form 5498-ESA, Coverdell ESA Contribution Information, to the IRS (normal deadline is May 31)

Distributions and Operations

  • Remove an excess contribution with earnings (normal deadline is June 1 of the following year)

 

Additional guidance and relief has been requested, including an extension of time for retirement plans to file 2019 calendar year returns in the Form 5500 series, an issue that has yet to be addressed by the Department of Labor.

 
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