The impact of COVID-19 on higher education institutions has been significant, and there’s some uncertainty around the tax deadlines that have shifted as part of the pandemic’s fallout. On April 9, 2020, the IRS released Notice 2020-23, providing guidance on deferred deadlines for tax payments. Here, we provide answers to 10 common questions around what this guidance means for institutions of higher education and what opportunities it provides.
1. Notices 2020-18 and 2020-20 provided relief from federal returns and payments due April 15, 2020. Has relief been provided for other forms?
Yes, Notice 2020-23 expands the previous relief to include tax-exempt filings and balances due May 15, 2020, as well as federal second quarter estimates due June 15, 2020. This includes Form 990 and Form 990-T and extends to July 15, 2020.
2. Does deferral of this tax deadline apply to only 2019 returns, or are tax-exempt filings due on extension included as well?
Per Notice 2020-23, tax-exempt filings originally due, or on a valid extension until May 15, 2020, are included and now due July 15, 2020.
3. Do we have to elect to utilize the deferred deadline or file an extension form?
No, these deferred due dates for filings and payments are automatic and no action is necessary.
4. If we have to file and pay excise tax with Form 4720 for compensation in excess of $1 million, is that filing and payment still due on May 15, 2020?
No, it isn’t due on May 15, 2020. The deferral of filings includes Form 4720 as well as the excise tax that would be due May 15, 2020, and provides an automatic extension to July 15, 2020.
5. Are any of the required foreign filing deadlines deferred?
For institutions that have passive foreign investments or investments generating foreign filings, Forms 5471, 5472, 8621, 8858, 8865, 8938, and 926 have been deferred to July 15, 2020. Additionally, if any installment payments under Section 965(h) are due on or after April 1, 2020, and before July 15, 2020, they’re also deferred.
6. If we intend to change our institution’s accounting period, are we required to file by May 15, 2020, if that’s our original or extended due date?
No, the adoption, election, retention, or change in accounting method or period doesn’t preclude an institution from utilizing the deferred deadline.
7. Our institution is currently going through an IRS examination for a prior year’s filing. The IRS has requested that we provide data regarding our unrelated business income activity before May 15, 2020. Is this due date deferred?
Yes, the notice also provides additional time for taxpayers to perform time-sensitive actions described in Reg. Section 301.7508A-1(c)(2), deferring these deadlines to July 15, 2020. This postponement includes taxpayers who are currently under examination.
8. Are any payroll taxes deferred?
An employer’s portion of Social Security, 6.2%, can be deferred for taxes incurred from March 27, 2020, to December 31, 2020, under Section 2302 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. If deferred, 50% of the deferred payroll taxes are due by December 31, 2021, and the other 50% are due by December 31, 2022.Learn more about CARES implications for taxpayers in our alert.
9. Are state returns and filings that our institution submits with our federal tax-exempt returns also deferred?
Notice 2020-23 relates specifically to federal tax filings and payments only. State deferrals of filing due dates and payments vary across states. We recommend checking with the state or your tax advisor to confirm any deferred due dates for filing or payments.
Some states have deferred filing and payment deadlines for sales and use tax, but this also varies by state.
Additionally, state charitable solicitation filings may have separate filings and also vary in whether or not they’re deferred. We recommend checking with the state or your tax advisor to confirm any deferred due dates.
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For questions about filing deadlines, please contact your Moss Adams professional.