Tax Day is finally here..... Now What?

Tax Day is finally here and taxpayers maybe a little bit baffled by that implication. See normally taxpayers were expected to filed their prospective tax returns by April 15 but due to this recent Covid-19 Pandemic that date moved to July 15. Now that July 15 is among us we have to remember exactly what brought us to this new extension date.

Taxpayers and businesses will have until July 15, 2020 to pay their taxes this year, but the filing deadline is still April 15. The change was announced on Tuesday afternoon by Treasury Secretary Steven Mnuchin, following President Donald Trump's declaration of a national state of emergency in the United States as a result of efforts to combat the Covid-19 Coronavirus pandemic and minimize economic disruption. Last week, the president announced he would ask the Treasury Department and IRS to extend  the deadline. 
Taxpayers and small businesses that traditionally face an April 15 tax deadline will be allowed more time to pay their taxes due but are still recommended to file by April 15. All individual U.S. taxpayers qualify for this extension and do not have to file any special paperwork or extension requests, as the deadline will be automatically extended.

The president also recently released disaster aid, urged each state to set up emergency operations centers and hospitals to ramp up emergency response plans. Also announced is the waiving of interest on federally held student loans during the state of emergency.
Taxpayers owing taxes can defer payment of up to $1 million in taxes until July 15, and corporate filers can defer tax payments of up to $10 million. We're waiting to hear if there will be an extension for quarterly estimated payments normally due on April 15.
“We encourage those Americans who can file their taxes to continue to file their taxes on April 15,” Mnuchin said. “Because for many  Americans, you will get tax refunds.”
It is expected that most state   legislatures are likely to follow suit, since most taxpayers  file   their  federal and state   income tax returns at the same time, but be sure to check with your state before making assumptions about payment deferrals.  Seven  states  do not have an income   tax:  Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Additionally, Tennessee and New Hampshire do not tax wages earned. California had already extended the state deadline to June 15. The AICPA has a list of changing state tax deadlines (PDF)

Such  a change in the deadline for individuals to pay  their annual  federal  income tax returns is  unprecedented at the national  level, although the IRS often grants such  extensions to more limited  geographical   areas following disasters.  Earlier this month, for  example, taxpayers affected by the recent Tennessee  tornadoes were granted  relief until July 15  of this year. 
"The extended tax payment deadline and penalty relief  is likely to be welcomed by  taxpayers," said Gail Perry, CPA, a tax  professional and the editor-in-chief of CPA Practice  Advisor.   "This is especially true for those who are dealing with  family   issues relating to the pandemic. The extension is also beneficial  to   the IRS as that agency might be facing reduced staffing  accompanied  by  taxpayers unable or unwilling to venture into a  government office   for  assistance. As for tax preparers, we will look  forward to a   busier  than usual summer and fall in 2020."
The change will have no effect on the millions of Americans who have already filed their taxes this year.



IRS procedures to expedite refunds
A corporation may expedite refunds of estimated taxes by filing either (1) Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, or (2) a "First Return" followed by a "Superseding Return" to expedite the processing of their refunds.
Individuals and estates and trusts can also take advantage of the First/Second return offering discussed next. Only corporations, however, may use Form 4466 to request a refund of estimated taxes.
Form 4466/overpaid estimated tax
In many cases, a loss corporation will have overpaid its estimated taxes when, for example, a significant part of the loss was incurred later in the year. A corporation can file Form 4466 after the end of its tax year, but no later than the due date for filing its tax return (not including extensions). Form 4466 must be filed before the corporation files its tax return. An extension of time to file the corporation's tax return will not extend the time for filing Form 4466. As such, calendar-year taxpayers must file their 2019 Form 4466 by April 15, 2020; the filing relief granted under Notice 2020-18 was not extended to Form 4466.
A corporation should be cautious in estimating the amount of its liability, because overstating the amount of the overpayment reported on Form 4466 could result in interest and penalties, including a penalty under IRC Section 6655(h), when the final tax is later determined on the tax return for the year. Multiple Forms 4466 can be filed during the period previously described.
Form 4466 has undergone an IRS processing change in recent years. The IRS conducts identity validation on all Forms 4466 by issuing a 1287C letter, usually about a month after the Form 4466 is filed. A unique code is imbedded in the letter and a Responsible Officer (who has authority to bind the company) must call the IRS to verify information on the Form 4466. Form 4466 cannot be validated by individuals authorized to represent a taxpayer before the IRS on a Form 2848 (POA).
Form 8302 can also be filed with Form 4466 to request an electronic deposit of a refund of at least $1 million.
First returns
There are three steps in the traditional First Return process:

1. An extension is filed for the corporation's return for the tax year.
2. The taxpayer files a First Return that generates a refund.
3. Within the period ending with the extended due date of return, the taxpayer files a Superseding Return that effectively becomes the taxpayer's return for that year.1

A corporation may desire to file its Form 1120, U.S. Corporation Income Tax Return (or other corporate return), as soon as possible after its year-end to obtain a refund, on an accelerated basis. As a result, questions may arise as to what constitutes a sufficient initial return (First Return), how complete a First Return must be, and which schedules must be included in the First Return filed by the taxpayer. Each return must meet minimum requirements as discussed in this Tax Alert and must (1) be filed on the proper form; (2) supply enough information to permit the IRS to calculate tax; (3) be properly signed under penalty of perjury; (4) represent an honest and reasonable attempt to satisfy the requirements of the tax law; and (5) be e-filed when required by the regulations unless a waiver to permit filing a paper return is obtained.
If a First Return is deemed incomplete, the taxpayer's refund will be delayed, the statute of limitations for assessment will not start running, and the taxpayer could face penalties.
There has been little explanation or discussion of what the IRS considers to be the minimum acceptable First Return. There is some support, however, for not including certain information reporting forms with an original loss return when a Superseding Return is expected to be filed. The First Return should include the taxpayer's best estimate of Subpart F income, U.S. shareholder calculation of GILTI, and IRC Section 250 deduction for FDII, in the computation of taxable income or loss reported on such return, based on the best available information at the time. At a minimum, the First Return should include at least one Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations, although it is recommended for the First Return to include completion of Form 5471 for each of the taxpayer's substantive foreign entities.
Estimates included in the First Return should represent good-faith best estimates (e.g., not "book" numbers imported into the return) and should be reflected as such in the return. The supporting files should document the consideration of the basis of any estimates used. Further, a whitepaper disclosure should be attached to the return explaining the purpose of the filing to the IRS and the taxpayer's intent to perfect the First Return with a Superseding Return.
A Superseding Return is a return that is filed before the due date (or extended due date when a corporation has requested an extension) and changes data reported on the prior-filed First Return. A Superseding Return becomes the original return for all purposes. As such, and in contrast to a corporate amended return, a return filed as a Superseding Return must include all final information, and not just information that changed from the prior filed return. A superseding return that must be e-filed must be a complete XML filing of the entire return, with all required forms, schedules, and attachments (XML or PDF, if applicable). A taxpayer filing a superseding return must indicate the return as such by selecting the Superseded Return checkbox (designation) in the software or the return will be rejected as a duplicate filing.
Implications
There are various filing dates and return-filing order that should be kept in mind to achieve the appropriate results. The Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax must be filed by the due date of the return without extensions. If filing a first return and a superseding return, the forms should be filed in the following order:

1. Form 7004, Application for Automatic Extension of Time
2. Form 1120, U.S. Corporate Income Tax Return (the First Return)
3. A Superseding Form 1120, before the due date of the return (including extensions)