The filing deadline for 2020 individual tax returns was postponed from April 15 to May 17, 2021, but the postponement did not apply universally. Additional questions remain concerning three matters: (1) the proper manner to timely obtain an extension of time to file gift tax returns; (2) whether 2020 income tax overpayments “occur” timely for purposes of 2021 first quarter estimated tax payments; and (3) the time to file the annual Report of Foreign Bank and Financial Accounts (FBAR). The following analysis may help demystify when reporting is due.
Gift Tax Extensions
The IRS did not postpone to May 17 the time to file Form 709 or to make associated payments of excise tax on taxable gifts (gift tax). You can request an extension of time to file Form 709 and to pay gift tax. But importantly, the IRS indicated on April 6 that filing Form 4868 after April 15 will not extend the due date for gift tax returns. To ensure you have your gift tax extension secured, it will be necessary to request an extension of time to file a gift tax return on or before April 15.
The AICPA presently recommends that Form 4868 be filed on or before April 15 for this purpose. When that is impractical or not possible, the AICPA recommends that taxpayers file Form 8892 by April 15 to receive an extension of a gift tax return in any situation where an extension is required.
The 2020 Overpayment Quagmire
First quarter estimated tax payment obligations for individuals also did not receive the May 17, 2021 postponement, and must be remitted on or before April 15, 2021. Because the due date for 2020 income tax returns was postponed, it was not certain that overpayments resulting from 2020 income tax returns would “occur” by April 15, 2021. If they do not, then taxpayers cannot rely on those overpayments to cover tax deposit obligations for the first quarter.
The IRS very recently provided guidance to answer this question. The IRS states that individuals will be able to credit 2020 overpayments against their first quarter estimated tax obligations for 2021 as long as the underlying payments are made on or before April 15, 2021. For example, a taxpayer that has a 2020 overpayment resulting entirely from 2020 estimated tax payments made during 2020 will have the 2020 overpayment available for credit against the first quarter estimated tax obligation for 2021. Alternatively, a taxpayer that has a 2020 overpayment resulting from a payment made after April 15, 2021 (e.g., a payment made on May 17, 2021 with an application for extension of time to file) will not have that portion of the 2020 overpayment available for credit against the first quarter estimated tax obligation for 2021.
FBAR Filing Deadline Remains April 15
The IRS posted online guidance on April 9 informing taxpayers that the deadline for filing FBARs was not postponed and remains April 15, 2021. However, all taxpayers receive an automatic 6-month automatic extension. There is no need to file any form to receive this FBAR extension.
The IRS apparently realized that its original online post was misleading, and on April 12 added the following sentence to its original message: “However, filers missing the April 15 deadline will receive an automatic extension until October 15, 2021, to file the FBAR. They don’t need to request the extension.”
The penalties for failing to file a FBAR can be significant. They can include civil penalties as well as criminal penalties that can include a fine and/or prison. A taxpayer filing a late FBAR may only avoid these penalties if they are able to show a reasonable cause for filing late. But again, penalties will not be applied to any FBAR Form filed prior to October 15 under the above automatic extension rule.
For More Information
Should you have any questions concerning the three topics, please contact a member of our team.
Published on April 13, 2021