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Podcast: How to Interpret the IRS Deadline Changes
March 26, 2020

If you haven’t filed your 2019 tax return but expect to file by July 15 per new IRS guidelines, what do you need to do?  That’s just one of the questions Commerce Trust Company East Region Tax Manager Tom Bassett, J.D., CPA, addresses in his informative podcast on deferred IRS tax deadlines and other financial considerations for your 2019 return.  The Coronavirus outbreak makes the tax season a moving target, but Tom’s insights may help you navigate strategies that can help your household or business.  

Woman processing taxes

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Chris Schildz:
Welcome to Conversations with Commerce Trust, where Commerce Trust Company shares commentary on economic matters important to you. This is another in our series of podcasts available on our website during the Coronavirus outbreak, to share insights on financial matters with interested clients. Today, we have Commerce Trust East Region Tax Manager, Tom Bassett. We are going to discuss some of the recent announcements by the Internal Revenue Service relative due to deferred tax deadlines during this national health crisis. Tom attended Washington University in St. Louis, earning two Bachelor of Arts degrees in physics and psychology, a Juris Doctorate, and Masters of Business Administration, and a master of science in business administration. He is a member of the Missouri Society of Certified Public Accountants and the American Institute of Certified Public Accountants. Tom, thanks for joining us.

Tom Bassett:
Thanks.

Chris Schildz:
This week the IRS released frequently asked questions regarding Notice 2020-18, which automatically postpones the federal income tax filing and payment deadlines from April 15th, 2020 to July 15th, 2020. Can you elaborate on that for us or maybe give us some highlights?

Tom Bassett:
Well, first off, what I want to make sure everybody is aware of, this is a very dynamic situation. This Notice 2020-18 is exhibit one as to how dynamic this situation is. That notice was issued late last week, about two or three days after the IRS had issued Notice 2020-17. So, even the IRS is having to update their rules kind of on the fly, and expand on what their prior guidance was, and then they issued these frequently asked questions to kind of expand on the notice to help people understand that.

Tom Bassett:
The number one takeaway for people listening to this is that individuals and trusts are quote unquote "effected taxpayers". And effected taxpayers, if you have a filing obligation for an income tax return, and income tax is the important words, on April 15 or a payment due on April 15, those are automatically postponed to July 15. You don't need to file an extension for your individual income tax return. You don't need to file an extension for your trust return. These are the federal rules. The states are doing different things. We'll talk about that later, I believe, in this podcast. Unlike the prior notice, 2020-17, under 2020-18 there is no dollar limitation on the amount of either balance due or first quarter estimate even that you can postpone to July. The
prior notice had a dollar cap on that. So the IRS is continuing to publish guidance and expand on the definitions of what acts can be postponed from April to July.

Chris Schildz:
Tom, let's get granular for just one second. If one hasn't filed their 2019 tax return that would've been due on April the 15th, but expect to file by July the 15th, what does that person need to do if anything?

Tom Bassett:
Per the Q&A and per the Notice 2020-18, they say you don't have to do anything. It's automatically extended till July 15th.

Chris Schildz:
Now Tom, are there some deadlines that have not been extended yet?

Tom Bassett:
And that's a good point of clarification. Income tax returns and income tax payments had been postponed to July 15, so if you have a gift tax return that you ... Because you made gifts last year, that would be due April 15. That deadline has not been changed. So the filing of a gift tax return or the payment if you have to pay any gift taxes has not been changed. Similarly, state tax return deadlines have not been moved. So if someone passed away roughly nine months ago and their estate tax return is due now or in the next month or two, you would still need either file the 706 or file an extension for that 706.

Chris Schildz:
That's an important point of clarification. For those of us making contributions to an IRA, a company retirement plan, health savings accounts, et cetera. When is the new deadline?

Tom Bassett:
And that's something that the notice was not clear on. The notice said your income tax return is not due until July 15, so there was a lot of chatter in the professional communities about whether that impacted other things tied to deadlines such as making contributions to IRAs. Q&A that the IRS issued and a caveat here, a Q&A is informal guidance by the IRS. It doesn't have the standing of the notice, but under Q&A question 17 it says yes, that the IRA deadline was now July 15 for contributions with respect to last year, 2019.

Chris Schildz:
Are gift tax returns still due April 15th?

Tom Bassett:
Yes they are. Because they're not an income tax return, the notice does not change the due date for gift tax returns, and the Q&A clarifies that as well.

Chris Schildz:
In our coverage footprint for Commerce Trust Company, are there any nuances in state deadlines in Missouri, Kansas, Illinois?

Tom Bassett:
There are. Missouri has conformed with the Notice 2020-18 pretty much all in line. Your income tax returns and any payments that would have been due April 15 are automatically postponed to July 15. Illinois and Kansas have not quite conformed, and estimated payments for example, that would be due April 15, your first quarter estimated payment for 2020 in Missouri, it's due in July. In Illinois and Kansas, it's due April 15th.

Chris Schildz:
Let's turn to businesses for a moment, Tom. What if a business has a filing due date on May the 15th, June the 15th et cetera, or some other date besides April the 15th?

Tom Bassett:
Businesses are included in the definition of the type of taxpayer that would get relief under the notice, but again, it's specifically limited to returns and payments that are due April 15. So a calendar year S corporation for example, had a return that was due in March, not effected by this. Any kind of a fiscal year business that would have returns due May 15, June 15, et cetera, not affected by this. You still have those filing deadlines and if you have any payments, those same payment deadlines. The same for payroll taxes for example. There's been no relief for that. So any payroll tax filings are still due on their normal schedules and so forth.

Chris Schildz:
Tom, maybe as a wrap up here for the moment, what other changes have occurred that our listeners would benefit from hearing about?

Tom Bassett:
Well, right now there is a very large bill trying to make its way through Congress. The Senate has been working on this for the last couple of days, into the wee hours of the night. It is the Cares Act, and it has a number of fiscal stimulus pieces baked into it, and it has some material income tax changes that if they became law would change much of our prior discussion.

Tom Bassett:
Under the current bill in the Senate, many of these due dates that we've been talking about would just all be pushed back to October 15. So your first quarter estimates for 2020, your second quarter estimates, which I don't know that we've emphasized, that is still due June 15, if you're an individual. That has not been changed by the notice. The third quarter estimate in September, all of these would be pushed back to October. Same for a trust. I haven't seen the actual language to know what type of business entities would also be able to push back payments, but they're looking at a massive deferral.

Tom Bassett:
They're also looking at making more changes to individual retirement accounts and changing the RMD rules so that you don't have to have a required minimum distribution from a retirement account in 2020 if you didn't want to take a distribution from your account. So there's quite a few things that are in the bill that, if they become law, will be material for many of our clients. We need to see what the house does to that bill and then ultimately what the president signs into law.

Chris Schildz:
Thanks, Tom, for those insights. That was conversations with Commerce Trust Company. If at the end of this podcast you still have questions unanswered, we encourage you to contact your portfolio manager for further discussion, or your advisor at Commerce Trust Company. Your dedicated financial professionals here at Commerce Trust are working hard to ensure your interactions with us run smoothly every day. Even in the face of this national health crisis. Commerce Trust Company is division of Commerce Bank. Important material disclosures regarding the content of this call follow.

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