IRS Notice 2020-35 Provides Additional Relief for Taxpayers

The IRS first extended filing and payment dates for certain time-sensitive acts, due to the COVID-19 pandemic, back on March 13, 2020, as detailed in a previous Marcum Tax Flash. Since then, the IRS has issued multiple notices of additional relief, the most recent of which is Notice 2020-35, which addresses issues related to employment taxes, employee benefits, and exempt organizations. The relief listed below is in addition to those provided under previous Notices.

Employment taxes

Employers making interest-free adjustments in order to correct employment tax reporting errors now have until July 15, 2020, to do so. This includes both the employer and employee portions of FICA taxes, Railroad Retirement Tax Act (RRTA) taxes on employees and employers, income tax withholding, and other backup withholding.

Electronic filing requirements for Certified professional employer organizations (CPEOs)

CPEOs are required to file quarterly Forms 941 and annual Form 943 utilizing magnetic media (including electronic filing). An individual waiver request is normally required, but the IRS has the authority to waive this requirement due to undue economic hardship. Under the Notice, the IRS is granting a temporary waiver of this electronic filing requirement for the second through fourth quarter 2020 Forms 941 and calendar year 2020 Form 943 for all CPEOs.

Funding for qualified defined benefit pension plans

Section 412 provides minimum funding standards for defined benefit pension plans along with the ability to request a waiver in the event of a temporary substantial business hardship. This waiver application generally must be filed by the 15th day of the third month following the close of the plan year. A multi-employer defined benefit plan is further required to obtain certifications from the plan actuary regarding the plan’s funding status by the 90th day of the plan year, to provide notifications in certain circumstances, and to adopt either a funding improvement plan or rehabilitation plan 240 days after the date of the required certification. The plan sponsor is then required to update the annual Form 5500 filed for the plan year. For these acts occurring between April 1, 2020, and July 15, 2020, the deadline has been extended to July 15, 2020, including requests for waivers, certification of funded status, and the annual update and filing of Form 5500. Similar relief also applies to cooperative and small employer charity pension plans.

Form 5330, Return of Excise Taxes Related to Employee Benefit Plans

Where the normal filing date is between April 1, 2020, and July 15, 2020, the filing and payment dates have been extended to July 15, 2020, and interest and penalties for this period will be waived.

Initial remedial amendment period for Section 403(b) plans

Section 21.02 of Revenue Procedure 2013-22 provides a remedial amendment period allowing an eligible employer to retroactively correct form defects in its written section 403(b) plan, either by timely adopting a pre-approved section 403(b) plan or amending its individual plan. March 31, 2020, was the original final day for making such remedial amendments. This has been extended to June 30, 2020 (please note this is different from the July 15, 2020 date for most other relief).

Form 990-N for small exempt organizations

Exempt organizations with annual gross receipts below $50,000 are required to provide an annual electronic notification via Form 990-N by the 15th day of the fifth month after the close of the organization’s tax year. For those forms due between March 30, 2020, and July 15, 2020, the form will be considered timely filed if filed by July 15, 2020.

Forms 5498

Forms 5498 come in many forms and provide contribution information for IRAs, HSAs, MSAs, and Archer MSAs. These forms were originally due to participants and the IRS by May 31, 2020. This filing date has been extended to August 31, 2020 (please note this is different from the July 15, 2020 date for most other relief and only applies for Forms 5498).

Above are just some examples of the IRS trying to ease the burden on employers, plan sponsors, and exempt organizations during these difficult times. We will continue to follow additional developments and will provide information as it is available. Please do not hesitate to contact your Marcum tax professional with any questions regarding this relief or any previous relief.

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