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MHCS Outlines Tax Deferral Dates to Assist Small Businesses

Tax Deferral Dates

May 1, 2020

The COVID-19 pandemic has led to a significant amount of change in 2020. The way people live, work, interact and just about everything else has been affected. In recent news and press conferences, references have been made to extending the tax deadline. You may be wondering what that means for you or your small business. The information below will break down the changes to tax filing due dates for individuals, businesses and other entities. However, there are several other considerations and implications to note regarding these due date changes.

Individuals

Federal 1040 Individual Return Due Date

The 2019 Federal Form 1040 is now due July 15, 2020. Individuals may file their return any time before the due date but are not required to. Everyone is eligible for the new due date. You do not have to be sick, quarantined or have any other impact from COVID-19 to qualify to file at the new date. The extended due date of individual returns currently remains October 15, 2020. If you cannot file by July 15, 2020 you will need to file an extension form to obtain the extension filing due date of the 15th. As a reminder, the extension is an extension to file your return, not an extension to pay any tax owed. Taxes should be remitted at the time the request for extension is filed.

Federal Return Payment

The date required to make a payment if you owe a balance on your Federal return is now also extended to July 15, 2020. If you have a balance due with your return, you can now wait until the 15th to remit payment to the IRS. You will not incur interest and penalties that would have normally been incurred if payment was made after April 15, 2020. If you have already filed your return, but have not remitted payment, you can also defer payment until July 15, 2020. You must pay any balance due by July 15, 2020 to avoid penalties and interest. Note that if a payment is already scheduled before July 15, the IRS will not cancel the payment or automatically defer it.

2020 Federal Estimated Tax Payments

Certain taxpayers are required to make quarterly estimated tax payments. The first quarter and second quarter estimated tax payments are now both due July 15, 2020. The third and fourth quarter estimates retained their original due dates of September 15, 2020 and January 15, 2021 respectively.

2019 Individual Retirement Account (IRAs)

The due date of 2019 IRA contributions is now extended to July 15, 2020 in conjunction with the tax return filing deadline. If you have taken any non-qualified withdrawals from the IRA, you now have until July 15, 2020 to pay the 10% penalty tax incurred due to the non-qualified withdrawal. Under the Coronavirus Aid Relief and Economic Security (CARES) Act, there are some exceptions to the 10% tax, up to $100,000 for those affected by COVID-19. These conditions are specific and should be analyzed on a case-by-case basis. Required minimum distributions (RMD) for 2019 (taken in 2020) and 2020 have been suspended. If you took a 2019 or 2020 RMD, you may have the ability to roll those funds back into your IRA within 60 days and not pay income tax on the distribution. This applies if you have not made another withdrawal in the last 365 days. Suspension of RMDs also applies to inherited IRAs. However, you do not have the ability to recontribute the funds if you have already taken the distribution.

2016 Amended Returns and Claims for Refunds

The usual April 15, 2020 deadline to claim a refund on Federal 2016 tax returns has also been extended to July 15, 2020. The law provides a three-year window of opportunity to claim a refund.

Health Savings Accounts (HSAs) and Medical Savings Accounts (MSAs)

The deadline to take advantage of HSA or MSA deductions on the 2019 return has been extended to July 15, 2020 in conjunction with the return filing deadline.

Iowa Individual Specific Deadlines:

  • Iowa 2019 1040 Individual Return Due Date: July 31, 2020
  • Iowa 2019 1040 Individual Payment Due Date: July 31, 2020
  • Iowa 2020 Estimated Tax Payments Due Date: 2020 estimates have retained the same due dates as in the past. Estimates are due the last day of April, July, September and January 2021. Because the filing deadline was moved to July 31, 2020, individuals can use their 2018 tax returns to determine their estimated tax payments for their first quarter estimate, due April 30, 2020, and second quarter estimate, due July 31, 2020.
  • Iowa 529 College Savings Contributions Due Date: 2019 contributions can be made through July 31, 2020 and qualify for a deduction on the taxpayer’s 2019 tax return

Business Entities

Federal 1120 Corporate Return Due Date

For calendar year end C-Corporations, the filing due date is now July 15, 2020 instead of the original April 15, 2020 due date. All fiscal year end filers with original tax return due dates between April 1 and July 15, 2020 are now due July 15, 2020. For example, if the corporation’s fiscal year end is January 31, 2020, the tax return is now due July 15, as opposed to the original return due date of May 15, 2020. Any balance due on the return must also be remitted at the new return due date. Note that any return that had an extended due date that falls between April 1 and July 15, 2020 also qualifies to be extended until July 15, 2020.

Federal 1120S (S-Corporation) and 1065 (Partnership) Return Due Dates

The tax return due dates were not extended for calendar year S-Corporation and Partnership tax returns. The March 15, 2020 due date was retained. These entities could have filed for an extension of September 15, 2020. Because the income from the S-Corporation or Partnership entities flow to their owners, generally on an individual entity level, the extension relief was given on individual tax returns. As mentioned previously, the individual tax return deadline was moved from April 15, 2020 to July 15, 2020. Fiscal year filers would follow the same logic as the fiscal year corporate filers mentioned above. Any extended returns required to be filed through April 1 and July 15, 2020 may now be filed July 15, 2020.

Employer Portion of Social Security Taxes and Railroad Retirement Taxes

Employer social security taxes that would be required to be paid and deposited starting March 27, 2020 through December 31, 2020 can be deferred for up to two years. Amounts deferred can be paid in two equal installments on December 31, 2021 and December 31, 2022. All employers are eligible to defer deposit and payment of their share of social security taxes. If the employer receives a loan from the Payroll Protection Program (PPP), they will only be able to defer social security tax until the point the lender determines the loan forgiveness eligibility and amount. After this is determined, employer’s share of social security tax will no longer be eligible for deferment. There are several restrictions that apply if other programs are utilized for COVID-19 assistance. 

Employer Retirement Plan Contributions

Much like individual taxpayers, business sponsored retirement plans now have until July 15, 2020 to contribute to the employer sponsored retirement plans and receive benefit for the contribution on the 2019 tax return. The deadline for contributions allowable on extended S-Corporation and Partnership returns has retained the same due date: September 15, 2020. The extended due date for C-Corporations is October 15, 2020.

Iowa Business Specific Deadlines

  • July 31, 2020 is the new filing deadline for the following 2019 Iowa returns:
    • IA 1120 Corporate Return
    • IA 1120F Franchise Tax Return for Financial Institutions
    • IA 1065 Partnership Returns
    • IA 1120S S Corporation Returns
    • IA Credit Union Money and Credit Tax Reports
    • Iowa 1040C Composite Returns and supporting schedules
    • Note that if the fiscal year return is due between March 19, 2020 and July 31, 2020, the new deadline is July 31, 2020.

Exempt and Non-Profit Organizations

Exempt 990/990-PF/990-T/990-EZ Organization Income Tax Return

The due date for exempt organizations, including personal foundations, is now July 15, 2020, as opposed to the original filing deadline of May 15, 2020.

Form 4720

The exempt organization return and payment for excise is now due July 15, 2020 in conjunction with the exempt entity return filing.

2020 990-W Estimated Tax Payments

First quarter estimates originally due April 15, 2020 (May 15 for Private Foundations) are now due July 15, 2020.

Trust and Estate Returns

1041/1041-N Federal Trust and Estate Income Tax Returns

Trust and Estates that are required to file income tax returns for 2019 are now due July 15, 2020. If any income tax is due for the trust or estate, the payment is now also due at the same time. No interest or penalties will be due if the tax is remitted by July 15, 2020. The extended due date of the trust and estate income tax returns remains October 15, 2020. For fiscal year estates, any fiscal year returns required to be filed between April 1 and July 15, 2020 is now due July 15, 2020.

Form 706 Estate Tax Return

Estate and Generation-Skipping Transfer tax returns are now due July 15, 2020 if the return was required to be filed between April 1 and July 15, 2020.

Form 709 Gift Tax Return

Gift and Generation Skipping Transfer tax returns are now due July 15, 2020 if the return was required to be filed between April 1 and July 15, 2020.

Iowa Fiduciary Returns:

  • Iowa 1041 Individual Return and Payment Due Date: July 31, 2020
  • Note that if the fiscal year return is due between March 19, 2020 and July 31, 2020, the new deadline is July 31, 2020.

As discussed above, there have been a multitude of due date changes for both individuals and businesses. With these changes, there are additional compliance and planning considerations. If you have questions or are wondering how the Treasury guidance may affect you and your business, please reach out to your CPA or trusted advisor.

This information is not intended to constitute tax advice. Information contained herein is intended as a general overview and not as tax advice to a specific set of facts. Please consult your tax advisor to discuss your specific situation.

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