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IRS Opens the Flood Gates for Relief for Filing, Payment Deadlines (Including Tax Court Petitions and Refund Suits) by ROBERT S. HORWITZ

IRC Section 7508A gives the Treasury Secretary the power to postpone certain deadlines in the case of a Presidentially-declared disaster.  Previously, the Secretary had postponed until July 15, 2020, the time for filing income tax returns and paying federal income tax due April 15, 2020.  On April 9, the IRS issued Notice 2020-23, which postpones until July 15, 2020, the filing of returns and the payment of tax due on or after April 1, 2020, and by July 14, 2020.  Notice 2020-23 also postpones the time for filing refund claims, Tax Court petitions and refund suits and for the IRS to assess and collect tax and to bring lawsuits regarding taxes.

 Postponement of the Time to File Returns and Pay Taxes

The affected returns and payments are individual income tax returns, corporate income tax returns, partnership returns, estate and trust income tax returns, estate and generation skipping transfer tax returns, gift and generation transfer tax returns, exempt organization business income tax returns, certain excise tax payments on investment income, quarterly estimated tax payments, and any forms, schedules or returns required to be filed with such returns.  Any election required to be made on an affected return (or accompanying form or schedule) is timely if filed on or before July 15, 2020.  The period between April 1 and July 15, 2020, will be disregarded in calculating interest, penalties and additions to tax for failure to file or pay.  These will begin to accrue on July 16, 2020.

A taxpayer who wants an extension beyond July 15, 2020, must file a request for extension beyond that date, but no extensions will be allowed “beyond the original statutory or regulatory extension date.”  Thus, if an estate is on extension to file an estate tax return by May 1, 2020, will have until July 15, 2020, to file and may not get a further extension.  An estate whose return was originally due on May 1, 2020, however, can file for an extension if it does so by July 15, 2020. The affected tax returns and forms are listed at the end of this blog, for those who are interested.

Relief is given to Opportunity Zone investors.  Where the 180 day period for making an investment at the election of the taxpayer under sec. 1400Z-2(a)(1)(A) falls between April 1 and July 14, 2020,  the taxpayer will have until July 15, 2020, to make the investment.

Postponement of Time to File Refund Claims, Tax Court Petitions and Refund Suits

The IRS also postponed until July 15, 2020, the time to perform any of the following “time-sensitive acts” that were due to be performed between April 1 and July 14, 2020: filing claims for refund or credit of any tax, filing a petition with the Tax Court, filing for review of a decision of the Tax Court, and filing a suit based upon a claim for credit or refund.  The Notice does not list other suits that a taxpayer can file, such as a wrongful levy suit, a suit for illegal collection action, or a suit to quash an Internal Revenue Service summons.  How does the Secretary have the power to extend the time for filing a refund suit in district court or the Court of Federal Claims or a petition with the Tax Court?  Sec. 7508A grants the Secretary the power to postpone any act that can be postponed under sec. 7508 (postponements for military personnel on service in a combat zone).  Sec. 7508(a)(1)(C) and (F) authorize the Secretary to postpone the date for filing petitions with the Tax Court or for review of a Tax Court decision and to file a suit on any claim for credit or refund.

Postponement of Certain “Time-Sensitive” Acts by the IRS

Finally, the Notice postpones the time within which the IRS is to perform certain time sensitive acts described in Treas. Reg. sec. 301.7508A-1(c)(2) with regard to the following persons: a) those under examination; b) those whose cases are with the Independent Office of Appeals; and c) those who between April 6, 2020 and July 15, 2020, file amended returns or make payments for a tax for which the time for assessment would otherwise expire.  The time-sensitive acts are: (i) assessing any tax; (ii) giving or making any notice or demand for the payment of any tax, or with respect to any liability to the United States in respect of any tax; (iii) collecting by levy or otherwise, of the amount of any tax liability; (iv) filing by the United States, or any officer on its behalf, of any suit in respect of any tax liability; (v) allowing a credit or refund of any tax; and (vi) any other act specified in a revenue ruling, revenue procedure, notice, or other guidance published in the Internal Revenue Bulletin).  If any of these acts were required to be performed between April 6 and July 15, 2020, the IRS has 30 days following the last date for performance (i.e., 30 days from July 15, 2020).

List of Affected Tax Returns and Forms

For tax nerds and others who may be interested, here are the specific returns and forms affected by the notice:

  1. Individual federal income tax returns: Forms 1040, 1040SR, 1040NR, 1040NR-EZ, 1040PR, 1040SS
  2. Corporate income tax returns: Forms 1120, 1120C, 1120F, 1120FSC, 1120H, 1120L, 1120PC, 1120POL, 1120REIT, 1120RK, 1120S, 1120SF
  3. Partnership returns: Forms 1065, 1066
  4. Estate and trust income tax returns: Forms 1041, 1041-N, 1041QFT
  5. Estate and generation skipping transfer tax returns: Forms 706, 706-NA, 706-A, 706-QGT, 706-GS(T), 706-GS(D), 706-GS(D-1)
  6. Gift and generation skipping transfer tax returns: Form 709
  7. Form 8971
  8. Estate tax payments of principal or interest due as a result of an election under secs. 6166, 6161, or 6163 and annual recertification requirements under sec. 6166
  9. Exempt organization business income tax form: Form 990-T
  10. Excise tax payments on investment income and return filings: Forms 990-PF, 4720
  11. Quarterly estimated income tax payments: Forms 990-W, 1040-ES, 1040-ES(NR), 1040-ES(PR), 1041-ES, 1120-W
  12. All schedules, returns and other forms that are filed as an attachment to the forms listed above or required to be filed by the due date of any of those forms, including Schedules H and SE and Forms 3520, 5471, 5472, 8621, 8858, 8865, 8938
  13. Any installment payment due under sec. 965(h) on or after April 1 and before July 15, 2020

Contact Robert S. Horwitz at horwitz@taxlitigator.com or 310.281.3200   Mr. Horwitz is a principal at Hochman Salkin Toscher Perez P.C., former Chair of the Taxation Section, California Lawyers’ Association, a Fellow of the American College of Tax Counsel, a former Assistant United States Attorney and a former Trial Attorney, United States Department of Justice Tax Division.  He represents clients throughout the United States and elsewhere involving federal and state administrative civil tax disputes and tax litigation as well as defending criminal tax investigations and prosecutions. Additional information is available at https://www.taxlitigator.com.

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