The IRS recently issued Notice 20-23, which amplifies the relief provided in earlier notices and provides for an almost comprehensive postponement to July 15, 2020, for federal income tax returns, payments, and other time-sensitive acts normally due between April 1, 2020, and July 15, 2020.
The items, otherwise due between April 1, 2020, and July 15, 2020, that were noted in our last guidance that have now been postponed to July 15 include:
- Estate Tax Return (Form 706)
- Split-Interest Trust Information Return (Form 5227)
- Corporation Application for Quick Refund of Overpayment of Estimated Tax (Form 4466)
- Refund claims for which the refund statute of limitations expires between April 1 and July 15
- Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts (Form 3520)
- Application for Change in Accounting Method (Form 3115)
- Return of Organization Exempt From Income Tax (Form 990)
- IRA Contribution Information (Form 5498 series)
- Income Tax Return of a Foreign Corporation (Form 1120-F)
- Nonresident Alien Income Tax Return (Form 1040-NR)
- Fiscal-year or short-year returns
- Second quarter estimates
The items that have NOT been postponed until July 15 are:
- Employer’s Quarterly Federal Tax Return (Form 941)
- Quarterly Federal Excise Tax Return (Form 720)*
*Note that excise tax payments on investment income and excise tax payments and return filings on Form 4720, Return of Certain Excise Taxes under Chapters 41 and 42 of the Internal Revenue Code have been postponed until July 15
The IRS has provided guidance on additional acts that have been postponed, including Qualified Opportunity Zone investments, 1031 like-kind exchanges, applications for tentative refunds, and elections under section 163(j), and provided relief to partnerships to be able to file amended returns.
Qualified Opportunity Zone Investments
Taxpayers seeking the benefits of investing in Qualified Opportunity Zones (sections 1400Z-1 and 1400Z-2) are required to make an investment in a “Qualified Opportunity Fund” within 180 days of the sale or exchange that gave rise to the eligible gain in order for the taxpayer to have made a qualifying investment. Taxpayers required to make such investment on or after April 1, 2020, and before July 15, 2020, now have until July 15, 2020, to make the qualifying investment.
1031 Like-Kind Exchanges
The 45-Day Identification Period and 180-Day Exchange Period deadlines in both deferred and safe-harbor reverse 1031 exchanges have been postponed. As a result, if the end of a taxpayer’s 45-day Identification Period or 180-day Exchange Period in a deferred exchange or the parallel periods in reverse exchanges under Rev. Proc. 2000-37 falls between April 1 and July 15, the applicable period is automatically postponed to July 15, 2020, unless a taxpayer chooses to opt out.
Applications for Tentative Refunds
In Notice 2020-26, the IRS granted a six-month extension of time to file Form 1045 or Form 1139, as applicable, with respect to the carryback of a net operating loss that arose in any taxable year that began during calendar year 2018 and that ended on or before June 30, 2019. This means calendar-year taxpayers need to file a tentative refund claim by June 30, 2020. Individuals, trusts, and estates use Form 1045, and corporations use Form 1139.
Elections under Section 163(j)
The IRS issued Rev. Proc. 2020-22, which allows certain taxpayers to make a late election, or to withdraw an election, under section 163(j)(7)(B) or section 163(j)(7)(C), as applicable. The revenue procedure also describes the time and manner in which certain taxpayers can elect (1) out of the 50 percent adjusted taxable income (“ATI”) limitation for taxable years beginning in 2019 and 2020, (2) to use the taxpayer’s ATI for the last taxable year beginning in 2019 to calculate the taxpayer’s section 163(j) limitation for taxable year 2020, and (3) out of deducting 50 percent of excess business interest expense for taxable years beginning in 2020 without limitation.
Partnerships Now Eligible to File Amended Returns
The IRS also issued Rev. Proc. 20-23, which provides relief for partnerships that filed returns on or before April 13, 2020. Under the revenue procedure, partnerships may file amended returns and issue amended Schedules K-1 for taxable years beginning in 2018 and 2019. To take advantage of the option to file an amended return, a partnership must file a Form 1065 with the Amended Return box checked and furnish corresponding amended Schedules K-1 to each of its partners. Additionally, the partnership must clearly indicate on the top of the return “FILED PURSUANT TO REV. PROC. 2020-23” and attach a statement with each Schedule K-1 sent to its partners with the same notation.
