The unprecedented fallout from the coronavirus pandemic has meant unprecedented concessions by the U.S. government in a number of respects.
The CARES Act’s $2 trillion stimulus package represents perhaps the largest investment in this regard, but a number of U.S. government agencies have enacted other significant rule changes to help the citizenry get through these challenging times.
Ashley Murphy, CFP®, AIF® is a principal and wealth strategist at Arete Wealth Strategists Australia, a fee-only financial planning and investment management firm for Australian/American expatriates around the United States and Australia. Ashley works with Australian and American expatriates to bring strategy, structure, clarity, confidence and compliance to their global financial lives and keep it that way. Ashley is a tri-citizen of the U.S., Australia, and the U.K. From 2014-2017, Ashley taught in the CFP programs at UC Berkeley Extension and Golden Gate University, he was a Knowledge Circle host for the International and Cross-Border Knowledge Circle with the Financial Planning Association (FPA) from 2017-2019 and is a regular conference speaker.
Andrew Kalotay is a leading authority on the valuation of taxable and municipal bonds. He is a prolific contributor to the literature on fixed income topics, such as bond refunding and the use and misuse of interest rate derivatives. His firm licenses fixed income valuation software and provides debt management advisory services. Before establishing Andrew Kalotay Associates in 1990, Dr. Kalotay was with Salomon Brothers. Prior to Wall Street, he was at Bell Laboratories and AT&T. On the academic side, he was the founding director of the graduate Financial Engineering program at Polytechnic University (now part of NYU). Dr. Kalotay holds a B.Sc. and M.Sc. from Queen's University and a Ph.D. from the University of Toronto, all in mathematics. He was inducted into the Fixed Income Analyst Society's "Hall of Fame" in 1997.
Guy Davidson, senior vice president, AllianceBernstein
One such rule change is the extension of this year’s April 15 tax deadline until July 15. Importantly, the extension also applies to Americans living abroad who would otherwise generally have a filing deadline of June 15.
The scope of the July 15 extension
When the July 15 extension was first announced in March, the taxpayer community felt a measure of relief combined with a modicum of uncertainty.
The extra time was welcome, but questions remained: Does the extension apply to the obligation to file, or the obligation to pay tax, or both? Does the extension apply to tax forms due on April 15 other than the basic federal income tax return (Form 1040)? Finally, what about estimated taxes? Are those being extended too?
Since the original announcement, the IRS has published several updates to clarify the scope of the July 15 extension.
First, the IRS announced that the extension to July 15 applies both to the obligation to file the tax return and to pay any taxes that are due.
The IRS then clarified that the extension applies to other tax forms that would otherwise be due on April 15. This includes corporate tax returns, estate and gift tax returns, exempt organization returns, as well as international information returns and related schedules.
The broad scope of the extension relief is especially relevant for U.S. citizens living abroad who are often required to file additional forms to report assets and activities outside the United States including, for instance, the Form 3520 to report a foreign trust, the Form 5471 to report a foreign corporation, and the Form 8938 to report foreign financial assets under FATCA.
Finally, the IRS did in fact extend the deadlines for quarterly estimated tax payments due on April 15 (the first payment date) and June 15 (the second payment date) to July 15 as well.
One important caveat for citizens living in the United States is the federal extension to July 15 does not necessarily apply to U.S. state and local filing deadlines. Taxpayers should check with their state tax agencies to verify whether an extension has been granted this year for the particular form obligation.
Further extensions still available
With July 15 a few weeks away, taxpayers still have ample opportunity to file this year’s tax return on time.
As with most years, taxpayers who are unable to file by this year’s deadline can file a request for an extension to Oct. 15, 2020. Understandably, the deadline to file the request itself was moved to July 15. It should be noted that the extension to Oct. 15 is only an extension to file and does not extend the time to pay federal income tax beyond July 15, 2020.
For U.S. citizens living abroad, an even further extension may be granted to Dec. 15 under certain circumstances. A tax professional should be consulted to discuss this extension option.
For more information on the July 15 extension as well as other rule changes in response to the pandemic, the IRS has created a webpage dedicated to this topic at https://www.irs.gov/coronavirus.
