Fiscal Filers Beware

Fiscal-year tax filers should be aware that the Section 7519 required payments were not extended under IRS Notice 2020-18.  Section 7519 payments are required for all partnerships and S corporations that have made an election under Section 444 to have a tax year other than the required year.  The payment is required by the IRS to prevent taxpayers from deferring a portion of taxable income into a future tax year.

 IRS Notice 2020-18 has effectively postponed the payment and filing of taxes otherwise due April 15, 2020 for most taxpayers; however, there has been no additional extension for the returns, forms and payments that are due between April 15, 2020 and July 15, 2020.  Per IRS Instructions, the 2019 Form 8752 (Required Payment or Refund Under Section 7519) must be mailed and the required payment made by May 15, 2020. 

Taxpayers that have a valid election under Section 444 should try to calculate any payment or refund under Section 7519 as soon as possible in order to better manage cash flow through the coming months.  Section 444 taxpayers with a base year income lower than the prior year will most likely net a refund depending on the timing of applicable payments, while Section 444 taxpayers with a base year income higher than the previous year should expect to make a payment.  Any underpayments with regard to Section 7519 could carry up to a 10% penalty as well as interest.

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