IRS Provides Relief to Executors + Trustees

Smart Summary

  • On April 9, the IRS released Notice 2020-23, which provides tax deadline relief for executors and trustees.
  • Deadlines for the estate tax return (Form 706), estate and trust income tax returns (From 1041), and all related attachments are delayed until July 15, 2020.
  • Deadlines for many other trust and estate forms, which are fully enumerated in the article, are also extended accordingly.

Even under normal circumstances, executors and trustees navigate a complex tax landscape when it comes to complying with the various tax requirements unique to estates and trusts. In order to comply, executors and trustees often rely on professionals, such as financial planners, accountants, bankers, and appraisers, to gather the information and to timely file tax returns and pay such taxes. Normal circumstances have long-vanished with the outbreak of the COVID-19 pandemic, as the U.S. economy seemingly stumbled into a self-induced coma overnight. With suddenly very limited access to the professional services needed to gather the information needed to comply with pending tax deadlines, executors and trustees faced what seemed like an insurmountable obstacle.

  • How can an estate file an estate tax return if an executor cannot get its assets appraised?
  • How can a trustee file an income tax return if the trustee cannot obtain accounting or financial services in a timely manner?
  • How can accounting or financial services provide timely services when courts, government agencies, financial institutions, and virtually all sectors of the economy are shutdown or halted to a crawling pace?

Pursuant to President Trump’s emergency declaration on March 13, 2020, the Department of the Treasury began to roll out incremental tax relief, which eventually delayed the filing and payment of certain tax obligations until July 15, 2020. But the initial roll out was narrowly focused on certain federal income tax obligations and then only expanded to gift tax obligations. Consequently, because trust and estate returns had not been addressed, it did little to relieve the growing obstacles faced by executors and trustees.

IRS Notice 2020-23 enumerates numerous “Specified Filings” that benefit from the new tax relief of the July 15, 2020, extension. In addition to those concerning trusts and estates, these specified filings also expanded to impact corporations and businesses, and affirm the relief already given to individuals. Executors and trustees have now been largely afforded the much-needed additional time to coordinate with other professionals to secure information for the proper filing of an estate or trust return.

The pandemic and its impacts are ongoing and its consequences on U.S. institutions, such as the Department of the Treasury, evolve daily. After all, in just a few short weeks, the IRS has already issued four notices pertaining to the pandemic and its impact on tax filings and tax payments. In addition to being complex, the tax landscape for executors and trustees has also become ever-changing and less predictable. Accordingly, executors and trustees should continue to monitor information released by the Department of the Treasury with their trusted legal and financial counsel.

10 Key Provisions of IRS Notice 2020-23

  1. The relief is automatic and does not require the filing of any extension forms.
  2. The relief postpones tax obligations due to be performed on or after April 1, 2020 and before July 15, 2020.
  3. Taxpayers may still choose to file an appropriate extension form by July 15, 2020, but the extension may not go beyond the original statutory or regulatory extension date.
  4. The relief includes not just the filing of specified forms, but also all schedules, returns, and other forms that are filed as attachments to the specified forms or are required to be filed by the due date of the specified forms.
  5. The relief includes any installment payments under §965(h) (election to pay liability in installments) due on or after April 1, 2020, and before July 15, 2020.
  6. Elections that are made or required to be made on a timely filed specified form (or attachment to specified form) are considered timely made if filed on such specified form or attachment on or before July 15, 2020.
  7. The period beginning on April 1, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to file the specified form or to pay the specified payment postponed by this Notice.
  8. Taxpayers have until July 15, 2020, to perform all specified time-sensitive actions that are due to be performed between the period of April 1, 2020, and July 15, 2020, including filing petitions with the Tax Court, or for review of a decision rendered by the Tax Court, filing a claim for a credit or refund of any tax, and bringing suit upon a claim for credit or refund of any tax, unless the time period for filing such claim or bringing such suit expired before April 1, 2020.
  9. The IRS is given additional time to perform certain actions, including against affected taxpayers, who are currently under examination, whose cases are with the Independent Office of Appeals, and taxpayers who, during the period beginning on or after April 6, 2020, and ending before July 15, 2020, file written documents described in §6501(c)(7) of the Code (amended returns) or submit payments with respect to a tax for which the time for assessment would otherwise expire during this period. With respect to those affected taxpayers, a 30-day postponement is granted for time-sensitive IRS actions if the last date for performance of the action is on or after April 6, 2020, and before July 15, 2020.
  10. A taxpayer is not relieved from payment obligations beyond July 15, 2020, even if a taxpayer appropriately files for an extension to file beyond July 15, 2020.

Trust + Estate Specified Filings

  • Estate and Trust Income Tax Payments and Return Filings on Form 1041, including Alaska Native Settlement Trusts (1041-N) and Qualified Funeral Trusts (1041-QFT).
  • Estimated Estate and Trust Income Payments and Return Filings on Form 1041-ES.
  • Estate (and Generation-Skipping Tax Transfer) Payments and Return Filings on Form 706, including those pursuant to Revenue Procedure 2017-34, Qualified Domestic Trusts (706-QDT), Nonresident Noncitizen Returns (706-NA), Additional Estate Returns (706-A), GST Return for Terminations (706-GS(T)), GST Return for Distributions (Form 706-GS(D)), and Notice of Distribution from GST (706-GS(D-1), including the due date for providing such form to a beneficiary.
  • Gift (and Generation-Skipping Transfer) Tax Payments and Return Filings on Form 709, including those due on the date an estate is required to file Form 706 or Form 706-NA.
  • U.S. Income Tax Return for Real Estate Investment Trusts on Form 1120-REIT.
  • Excise tax payments on investment income and return filings on Form 990-P (Private Foundation or §49479a)(1) Trust treated as private foundation).
  • Information Regarding Beneficiaries Acquiring Property from Decedent on Form 8971, including any supplemental Form 8971 and all requirements contained in Section 6035(a) of the Code.
  • Estate tax payments of principal or interest due as a result of an election made under Sections 6166, 6161, or 6163 and annual recertification requirements under section 6166 of the Code

Other Specified Filings

  • Individual Income Tax Payments and Return Filings Form 1040, including for Seniors (1040-SR), Nonresident Aliens (Form 1040-NR), Certain Nonresident Aliens with No Dependents (Form 1040-NR-EZ), Self-Employment (Form 1040-SS), Self-Employment Puerto Rico (Form 1040-PR), Estimated Tax for Individuals (Form 1040-ES), Estimated Tax for Nonresident Alien Individuals (Form 1040-ES (NR)), and Estimated Tax on Self-Employment Income and Household Employees of Puerto Rico (Form 1040-ES (PR)).
  • Calendar Year or Fiscal Year Corporate Income Tax Payments and Return Filings Form 1120, including Cooperative Associations (Form 1120-C), Foreign Corporations (Form 1120-F), Foreign Sales Corporation (Form 1120-FSC), Homeowners Associations (Form 1120-H), Life Insurance Companies (Form 1120-L), Nuclear Decommissioning Funds and Certain Related Persons (Form 1120-ND), Property and Casualty Insurance Companies (Form 1120-PC), Political Organization (Form 1120-POL), Regulated Investment Companies (Form 1120-RIC), S Corporations (Form 1120-S), and Settlement Funds under Section 468B (Form 1120-SF).
  • Calendar Year or Fiscal Year Partnership Return Filings on Form 1065.
  • U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return on Form 1066.
  • Exempt organization business income tax and other payments and return filings on Form 990-T.
  • Exempt Organization Business Income Tax Return (and proxy tax under §6033(e) of the Code.
  • Excise tax payments on investment income and return filings on Form 990-P (Private Foundation or §49479a)(1) Trust treated as private foundation).
  • Excise Tax Payments and return filings on Form 4720 (Certain excise taxes under Chapters 41 and 42 of the Code).
  • Quarterly estimated income tax payments calculated on or submitted with Form 990-W (estimated tax on unrelated business taxable income for tax-exempt organizations).
  • Estimated Tax for Corporations on Form 1120-W.