When Do We Have to File and Pay Our Federal Taxes This Year?

Today we welcome back guest poster Tom Greenaway. Tom is a principal in KPMG’s Tax Controversy Services practice. He discusses the issue of 7508A and this year’s tax deadlines.

Most years, the due dates for federal tax filings and payments are obvious. This year, the answers are not so clear, especially as disruption caused by the COVID-19 pandemic continues to spread through the summer.

As some practitioners noted early this spring, this year is different for two reasons: COVID-19 and Congress. COVID-19 has created, among other things, an ongoing nationwide disaster. And Congress, late last year, passed a law shielding qualified taxpayers against tax deadlines until 60 days after the last incident in a presidentially-declared disaster area

In this post, we focus again on the potential technical “60-day rolling shield” defense to tax deadlines provided by section 7508A(d) of the Internal Revenue Code. As applied to the pandemic, this position has been embraced by the American Bar Association Tax Section and the IRS National Taxpayer Advocate. Taxpayers facing significant financial hardships—and their advisors—should consider the merits of this position before reaching for their checkbooks on July 15, the extended due date set by IRS. The ability to use the funds for other purposes, delinquency penalties, and interest hang in the balance.


Background: How Hard Can It Be To Figure Out Tax Deadlines?

IRS computers automatically assess delinquency penalties on late-filed returns and late-paid taxes. These penalties can be substantial. They are, however, subject to reasonable cause relief for taxpayers who exercise ordinary business care and prudence. Outside the context of IRS administrative waiver provisions (like first-time abate), it is hard to obtain reasonable cause relief for delinquency penalties, especially when claiming reasonable reliance on professional advice.

As the Supreme Court noted in the 1985 Boyle case: “The Government has millions of taxpayers to monitor, and our system of self-assessment in the initial calculation of a tax simply cannot work on any basis other than one of strict filing standards. Any less rigid standard would risk encouraging a lax attitude toward filing dates. Prompt payment of taxes is imperative to the Government, which should not have to assume the burden of unnecessary ad hoc determinations.” All well and good.

Here’s the punchline from Boyle: “It requires no special training or effort to ascertain a deadline and make sure that it is met.” In Boyle, the Court rejected an executor’s claimed reliance on an attorney to prepare and timely file an estate tax return to avoid delinquency penalties. The Court established a bright-line general rule, holding that that the failure to timely file could not be excused by the taxpayer’s reliance on an agent to establish reasonable cause for a late filing. The Court allowed, however, that this general rule would not apply in “a very narrow range of situations.”

In particular, Boyle explicitly declined to resolve the circuit split as to whether a taxpayer demonstrates reasonable cause sufficient to avoid delinquency penalties when, in reliance on the advice of an accountant or attorney, the taxpayer files a return after the actual due date but within the time the advisor erroneously thought was available. Before and after Boyle, the Tax Court and some circuit courts consistently have held that erroneous professional advice with respect to a tax deadline constitutes reasonable cause if such reliance was reasonable under the circumstances.

This Year: Pretty Hard

This year, there is a legitimate question about when federal tax returns must be filed and federal tax liabilities paid. In short, this year we may have fallen into one of those narrow situations anticipated by—and expressly reserved in—the Supreme Court’s Boyle opinion.

As noted above, in late 2019 Congress amended the Internal Revenue Code section that gives Treasury authority to postpone tax deadlines by reason of presidentially declared disasters. In a nutshell, new section 7508A(d) extends the postponement period for any qualified taxpayer 60 days after the “latest incident date” specified in the presidentially declared disaster declaration, “in the same manner as a period specified under subsection (a).” Section (d) applies in addition to any other postponement period provided by IRS and Treasury under subsection (a).

Every FEMA Major Disaster Declaration with respect to COVID-19 lists January 20, 2020 as the start date of the “Incident Period.” On March 13, 2020, the President issued an emergency declaration under the Stafford Act in response to COVID-19. The Emergency Declaration instructed the Secretary of the Treasury “to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate, pursuant to 26 U.S.C. 7508A(a).” IRS and Treasury invoked section 7508A(a) by issuing Notice 2020-23 and other guidance postponing tax filing and payment deadlines until July 15 for all affected taxpayers. Neither the President nor IRS mentioned section 7508A(d) in the declaration or guidance, and IRS didn’t say on which day the Incident Period started: January 20, March 13, or some other date.

While some may argue that Congress did not contemplate ongoing disasters (such as the COVID-19 outbreak) when enacting subsection (d), the provision by its terms is not limited to time-limited disasters such as tornados, hurricanes, or floods.

In March, the IRS issued a tolerably terse statement for use in a Wall Street Journal article: “The President’s March 13 Stafford Act declaration didn’t automatically trigger the full range of filing relief.” Since then, IRS and Treasury have gone mute on the question as to why, in their view, section 7508A(d) does not add a rolling 60-day tail onto the end of the relief Treasury provided under section 7508A(a).

Interested groups have asked IRS for more time, but last week the IRS Commissioner testified to the Senate Finance Committee that IRS anticipates no shift from its current position that July 15 is the final payment deadline for postponed payments. “Protecting the revenue” is always a dubious rationale for IRS enforcement priorities, see Rev. Proc. 64-22, and it seems even more so in the current environment. To be clear, the Commissioner assured the Senate Finance Committee that IRS will “exercise discretion on the back end,” but it is better to build a technical basis before taking a tax position rather than depend on the discretion of the IRS afterwards.


Practitioners and academics continue to discuss the merits of the 60-day rolling shield position. Most taxpayers with no liquidity issues or appetite for picking a fight with IRS will pay their outstanding taxes on or before July 15. And IRS offers many payment plans and alternative arrangements to qualifying taxpayers.

Most taxpayers do not plan into fights with the IRS, and taxpayers and practitioners should not take the 60-day rolling shield position as an opportunistic way to circumvent the postponed due dates. Nevertheless, the position might be proven correct in time.

Taxpayers in dire straits may want to work with their professional tax advisor to consider whether they may further postpone their tax filing and tax payment obligations this year. The first building blocks in any such position would rely on more well-established grounds for reasonable cause relief, such as “undue hardship.”  But the 60-day rolling shield position deserves serious consideration as well. Even if the 60-day rolling shield position is not sustained, obtaining competent professional advice before July 15 may mitigate the downside risk of delinquency penalties for taxpayers who rely on that advice in good faith.

The following information is not intended to be “written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax advisor. This article represents the views of the author(s) only, and does not necessarily represent the views or professional advice of KPMG LLP.

How Will IRS and Taxpayers Deal with the Administration’s Newfound View that the Entire ACA Is Unconstitutional?

Today we welcome back guest poster Tom Greenaway. Tom is a principal in KPMG’s Tax Controversy Services practice. Tom raises a question about a potential collateral consequence of the Administration’s new litigating position in the ongoing Affordable Care Act litigation. For background on the case and additional implications, I recommend Katie Keith’s Health Affairs blog post. Christine

Last week the Department of Justice signaled that the United States now thinks that the entire Affordable Care Act (Obamacare) is unconstitutional, in a filing in the Texas v. United States case. Eventually that position will be tested and decided by the appellate courts–again–but in the meantime, what will federal agencies like the IRS do?


For instance, the 3.8 percent tax on net investment income was added to the Internal Revenue Code by the ACA. It generates about $20 billion in revenue each year. Will IRS put out guidance saying that taxpayers don’t need to pay that tax anymore? Doubtful.

Generally, both practitioners and the IRS dismiss, as frivolous, arguments that the federal tax laws are unconstitutional.

Nevertheless, some taxpayers may take the view that if both a district court and DOJ think the entire ACA is unconstitutional, there must be at least a reasonable basis, if not substantial authority, for that position. If so, taxpayers who decline to pay net investment income tax this filing season may avoid penalties in the event that they (and the administration) are proven wrong on the constitutional question.

Does it seem fair for the IRS to impose accuracy-related penalties on taxpayers who take the exact same position on an issue as DOJ?


The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser. This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG LLP.

©2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Unlucky Friday the 13th: No Refunds this Year for Taxpayers Who Defer Paying Mandatory Repatriation Tax?

Today we welcome back guest poster Tom Greenaway and his colleague Mike Zima. Tom is a principal, and Mike is a senior manager, in KPMG’s Tax Controversy Services practice. We are fortunate to gain their insights as they describe the approach IRS is taking to overpayments and mandatory repatriation liabilities this filing season. These issues primarily affect our nation’s largest taxpayers. Keith

With last year’s tax reform, Congress gave taxpayers the option to pay their section 965 mandatory repatriation liability in installments over eight years. The IRS has issued guidance on the reporting and payment of section 965 liabilities in the form of several different Notices and Q&As on the Service’s website.  

On April 10, 2018, the Service Q&As directed taxpayers to make two separate payments: (1) a payment towards non-section 965 liability; and (2) a payment towards section 965 liability paid by check or money order and labeled “2017 965 Tax.” Except for U.S. citizens living outside of the United States and Puerto Rico, both payments were due at the due date of the taxpayer’s income tax return, without extensions. For calendar-year taxpayers, that date was April 17, 2018. 

On Friday, April 13, 2018, one of the last business days before the filing deadline, the Service updated its section 965 Q&As to inform taxpayers that no refunds or credits of 2017 tax payments will be processed unless and until the amount of payments exceeds the entire 2017 income tax liability, including all amounts to be paid in installments under section 965(h) in subsequent years. This means that any overpayments will be applied to the deferred section 965 liability before being refunded.




For example, say you owe $1,000 in 2017 income taxes before considering mandatory repatriation, and your section 965 mandatory repatriation tax liability is $500. Congress gave taxpayers the option to pay that $500 mandatory repayment liability in eight annual installments of increasing amounts, an option most taxpayers plan to select for obvious cash flow reasons. The first installment, which was due on April 17, 2018, is eight percent of the $500, or $40. Let’s further assume that you made $1,200 in estimated payments for 2017—more than enough to cover both the normal tax liability and the first section 965(h) installment payment. 

Until April 13, most taxpayers had assumed that if their 2017 estimated tax payments and credits totaled more than their regular tax liability plus the first section 965 installment ($1,040 in my example), any excess payments would be refunded or available to be used as a credit towards 2018 estimated taxes ($160 in my example: $1,200 – $1,040 = $160). That assumption is wrong, based on the Friday-the-13th administrative guidance posted on the IRS website. 

Instead, IRS will take any overpayment reported on the 2017 Form 1120 and apply it to the deferred section 965(h) balance, leaving little or nothing left to be applied to 2018 (nothing in my example).


The IRS is on solid technical ground. It is a bedrock principle of tax procedure that taxpayers are only entitled to a refund or a credit if they pay more in taxes than they owe. See Lewis v. Reynolds, 284 U.S 281 (1932). As a technical matter, individuals and other calendar-year taxpayers owe their total section 965 liability on April 17, 2018, even if they defer payment by electing into the statutory installment plan. (The section 965 inclusion also increases Subpart F income in the last taxable year of a deferred foreign income corporation which begins before January 1, 2018. See I.R.C. § 6403.) On the other hand, when and if IRS applies overpayments to deferred mandatory repatriation liabilities, IRS will undermine the deferral election Congress granted taxpayers. 

The Problem & Taxpayer Responses

The big problem is that IRS announced this guidance on one of the last business days before the tax deadline. Cash flow is important to all taxpayers. Until Friday, April 13, thousands—if not millions—of taxpayers had been banking on using their 2017 overpayments for things other than pre-paying what they thought were deferred section 965 tax liabilities. Many thoughtful and conservative taxpayers subject to section 965 responding to the initial set of Q&As IRS issued in March paid more in estimated taxes than they thought they would owe, just in case, thinking that any overpayments would be available for refund late this year when they filed their tax returns. Those taxpayers will be disappointed.

Billions of dollars hang in the balance. The Joint Committee on Taxation estimated that taxpayers would defer payment of more than $250 billion in mandatory repatriation liabilities.

The day after IRS revised its Q&As, on April 14, KPMG recommended that corporate taxpayers adversely affected by the Service’s late-breaking guidance should consider filing Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, no later than April 17, 2018 in order to preserve the effect of their section 965(h) installment election. That narrow window is now closed.

Frozen Forms 4466

Moreover, we recently learned that the Service has halted the processing of Forms 4466 in cases where taxpayers have told IRS they will have a section 965 liability.

Prepayments of tax liabilities are generally considered tax payments. See Ott v. United States, 141 F.3d 1306, 1309 (9th Cir. 1998). Section 6513(b)(1) provides that estimated taxes are “deemed to have been paid” on the original due date of the return for the tax to which the prepayment relates. See Baral v. United States, 528 U.S. 431 (2000).  Nevertheless, the tax law has always drawn a distinction between tax payments and deposits. See, e.g., Rosenman v. United States, 323 U.S. 658, 662 (1945). Courts look to a taxpayer’s intent when deciding whether a remittance is a payment or a deposit. See Zeier v. IRS, 80 F.3d 1360 (9th Cir. 1996); Ewing v. United States, 914 F.2d 499, 502-03 (4th Cir. 1990); Ameel v. United States, 426 F.2d 1270, 1273 (6th Cir. 1970); Fortugno v. Commissioner, 353 F.2d 429, 435 (3rd Cir. 1965); Lewyt Corp. v. Commissioner, 215 F.2d 518, 522-523 (2d Cir. 1954), aff’d in part and rev’d in part on another issue, 349 U.S. 237 (1955); Risman v. Commissioner, 100 T.C. 191 (1993). “Whether a remittance to the Service is a payment, or is a general deposit whose recovery would not be statutorily barred, may be a matter of intent and circumstance.” David v. United States, 132 F.3d 30 (1st Cir. 1997) (unpublished).

The Congressional purpose supporting section 6425 is “to allow a corporation to apply for a quick refund or, more technically, an adjustment of overpayment of estimated tax, immediately after the close of its taxable year.” S.Rep. No. 1014, 90th Cong., 2d Sess. (1968) at 800. Before the process of applying for a quick refund was created, corporations often waited more than eight months after the close of a tax year before they could obtain refunds of excessive estimated tax payments. See Phico Group, Inc. v. United States, 692 F. Supp. 437, 440 (M.D. Pa. 1988). The quick refund process was designed to ease the burden on corporations required to make estimated tax payments. S.Rep. No. 1014, 90th Cong., 2d Sess. (1968) at 800.

Section 6425(b)(2) provides that the Service, “within the 45-day period after the return has been filed, may credit the amount of the adjustment against any liability in respect of an internal revenue tax on the part of the corporation and shall refund the remainder to the corporation.” Congress’ use of the word “shall” signifies the mandatory obligation section 6425(b) imposes on the Service to refund the amount claimed on Form 4466. Moreover, Treas. Reg. section 1.6425-3(e) provides that if the Service allows the Form 4466 adjustment, it may first credit the amount of the adjustment against any liability in respect of an internal revenue tax on the part of the corporation which is due and payable on the date of the allowance of the adjustment before making payment of the balance to the corporation. The Service may not apply any portion of the adjustment to a tax that is not due and payable as of the date of the filing of the Form 4466.

We are unaware of any authority that enables IRS to freeze the processing of properly-filed Forms 4466. KPMG Washington National Tax and Tax Controversy Services are engaged in coordinated efforts to persuade the Service to release quickie refunds requested on 2017 Forms 4466 on several different fronts: with IRS Service Centers, through the IRS Taxpayer Advocate, with IRS leadership, and through industry channels.


IRS is doing the best it can under tough conditions. But last-minute guidance disrupts settled plans, and IRS is on thin ice freezing the processing of timely- and properly-filed Forms 4466.


IRS Campaign Season Begins

Today we welcome first-time guest poster Tom Greenaway. Tom is a principal in KPMG’s Tax Controversy Services practice. He is a former senior attorney in the IRS Office of Chief Counsel’s then-Large and Midsize Business Division. Tom has written on a variety of tax procedure issues and is in the process of updating the chapter on examinations in the 7th edition of Effectively Representing Your Client Before the IRS. We are fortunate to gain his insights as he describes the rollout of IRS changes in its enforcement strategies relating to our nation’s largest taxpayers. Les

For several years, the Large Business & International Division of the IRS (LB&I) has been shifting its approach to its enforcement priorities in light of prolonged budget constraints and reduced staffing. LB&I leadership is trying to better select returns for examination, and to swiftly address noncompliance issues when they find them, all in the name of efficiency and increased productivity.

Productivity in the context of IRS enforcement usually means generating and sustaining meaningful adjustments (though individual revenue agents and managers are not evaluated on this basis). For decades, however, the “no-change” rate for LB&I corporate examinations has been stuck above 20 percent, and the “no-change” rate is more than double that—almost 50%—for LB&I examinations of pass-thru entities and foreign corporations. In IRS jargon, a “no-change” means an audit did not generate any adjustments to the tax return as filed—thus no return on this significant investment of IRS resources. Corporate taxpayers and pass-thrus with more than $10 million in assets on their balance sheets are LB&I taxpayers.


IRS enforcement serves as a vital backstop to our system of voluntary income tax compliance. But the current trend of fewer examinations owing to budget cuts and increased non-income tax enforcement responsibilities, combined with perennially high no-change rates, is a bad mix. This is a prime reason LB&I is fundamentally changing its process and structure.

One element of LB&I’s new process is to risk assess taxpayers centrally and develop nationwide compliance “campaigns.” According to IRS, a campaign will be developed when LB&I decides, centrally, that an issue requires a response across an identified population of taxpayers in the form of one or multiple “treatment streams.” This centralized risk assessment will include the use of data analytics to identify issues and taxpayers that pose the highest risk to sound tax administration and compliance. LB&I announced this shift in approach more than a year ago, and in response more than 600 campaign ideas were submitted for consideration, mostly from internal IRS sources. Andrew Velarde, Some Complex Issues Won’t Be Part of Initial LB&I Campaigns, Tax Notes Today, (Nov. 15, 2016) available at 2016 TNT 221-3.

On January 31, 2017 IRS released the initial rollout of 13 different LB&I’s campaigns. Each campaign is assigned to an LB&I practice area and executive who will serve as the lead.

Here’s the list of the initial 13 campaigns:

  • Section 48C Energy Credits
  • OVDP Declines-Withdrawals
  • Section 199 Domestic Production Activities Deduction – Multichannel Vide Program Distributors & TV Broadcasters
  • Micro-Captive Insurance
  • Related Party Transactions
  • Deferred Variable Annuity Reserves & Life Insurance Reserves Industry Issue Resolution (IIR)
  • Basket Transactions
  • Land Developers – Completed Contract Method (CCM)
  • TEFRA Linkage Plan Strategy
  • S Corporation Losses in Excess of Basis
  • Repatriation
  • Form 1120-F (Foreign Corporation) Non-Filer Campaign
  • Inbound Distributors

The initial campaigns cover a wide range of topics. They range from technical tax issues affecting multiple industries (e.g., transfer pricing by inbound distributors, cash repatriation strategies), to industry-focused issues (e.g., variable annuity reserves IIR for insurers and completed contract method for land developers), to procedural compliance issues (e.g., OVDI withdrawals, practical workarounds of TEFRA partnership linkage limitations, and foreign corporate non-filers). Some campaigns that have been promised, like Chapter 3 withholding, were not included in this initial rollout.

As promised, the recommended “treatments” for each campaign vary, although all of the campaigns (except the insurance IIR) will involve examinations to some degree or another.

Some of the campaigns already have well-established treatments in place. For instance, IRS has already identified basket transactions as listed transactions and transactions of interest, and recently issued a related Practice Unit. Practice Units on inbound distributors have been available to the public since December 2014. Treatments of other issues, on the other hand, like the Insurance Industry IIR and TEFRA linkages, have been stalled for years.

Large business taxpayers—and their LB&I examination teams—will need to learn how to adapt to IRS campaigns. IRS officials have said that if a return selected for a campaign examination does not fit the targeted facts or concerns, LB&I wants to release the taxpayer and potentially refine the campaign. Amy Elliott, First LB&I Campaign List to Include Inbound and Outbound Issues, Tax Notes Today, (Dec. 19, 2016) available at 2016 TNT 243-3. Practitioners will play an important role in helping examiners understand whether the targeted concern is actually an issue on the returns selected.

On properly selected campaign examinations, the transparency and commitment to collaboration that are hallmarks of the new LB&I generally and the campaign process specifically should lead to faster issue identification, development, and resolution on campaign cases—all of which should be shared goals of both taxpayers and the IRS. Planned ongoing feedback from this process should further help IRS refine or even end a treatment, or a campaign, if the treatments succeed, or do not work.

Another key for practitioners will be to maintain the team’s focus on pre-identified campaign issues. Traditionally, LB&I examination teams enjoyed wide latitude to identify and develop issues for examination. That is all changed now. A shift towards centrally-developed campaigns necessarily comes at the expense of the field teams’ discretion to raise issues. According to at least one official, examination teams working campaign cases may raise other, non-campaign issues “that they feel they cannot walk away from,” but that standard sets a high bar for overloaded examination teams to clear. Andrew Velarde, Some Complex Issues Won’t Be Part of Initial LB&I Campaigns, Tax Notes Today, (Nov. 15, 2016) available at 2016 TNT 221-3.


The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser. This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG LLP.

©2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.