Deadlines, Extensions, and Pandemics

With COVID-19 wreaking havoc on people and business, the due dates for filing and paying personal income tax have been extended in both Canada and the US.

The usual deadlines for federal returns (April 15 in the US, April 30 in Canada) are written into the law^[1]IRC § 6072(a); ITA s. 150(1)(d), but in both countries the taxing authority has the power to extend the deadline at its discretion^[2]IRC § 7508A; ITA s. 220(3).

The IRS has done so in a series of Notices^[3]Notices 2020-17, 2020-18, 2020-20, and 2020-23 granting increasingly broad relief. The deadline is now July 15, 2020 for the filing of 2019 income and gift tax returns, the payment of 2019 tax owing, and the payment of estimated tax for Q1 and Q2 2020.

All of the 43 US states that tax personal income have granted filing and payment extensions as well^[4]AICPA State Tax Filing Guidance—most of them to the same date (July 15) as the IRS.

Canada’s deadline relief^[5]Income tax filing and payment dates: CRA and COVID-19 is more generous than the US’s for payment (September 1), but less so for filing (June 1).

To be sure, the US already had a procedure, pursuant to statute^[6]IRC § 6081(a), for extending time to file: Form 4868, by which filing could be deferred to October 15. But that extension, unlike the new COVID-19 relief, entailed no deferral of payment: the clock on the 0.5%/month failure-to-pay penalty^[7]IRC § 6651(a)(2) began ticking after April 15 on any balance due.

US citizens in Canada may be less excited about the US’s July 15 deadline:

• They are ordinarily allowed an automatic extension to June 15 of both filing and payment, provided their “tax homes and abodes, in a real and substantial sense” are outside the US^[8]Reg. § 1.6081-5(a)(5); “tax home” and “abode” are terms of art deserving separate discussion, but this will generally reach those who live and work abroad. (A statement must be attached to the return.)
• To claim Canada’s foreign tax credit, the US tax liability must be known (and vice versa). So taxpayers who file returns in both countries will prepare them together, subject this year to Canada’s earlier deadline of June 1.

What about foreign asset reporting?

US filers report foreign assets on two forms for two agencies: FinCEN Form 114 (the “FBAR”) and the IRS’s Form 8938. Canada has their own form for the same purpose (T1135), filed separately from the tax return.

No help is here for the FBAR, but it was hardly needed. The FBAR has a nominal deadline of April 15, but the statute so providing^[9]Pub. L. No. 114-41, § 2006(b)(11), 129 Stat. 443, 458 (2015) allows for an extension to October 15, which FinCEN grants automatically^[10]FBAR – Electronic Filing Instructions (“specific requests for this extension are not required”). The IRS is also clear that its relief encompasses all schedules and forms, including Form 8938, that attach to the return^[11]Notice 2020-23 § III.B..

As to Canada, the CRA’s webpage announcing new dates^[12]supra note 5 does not mention the T1135. But the T1135 is pegged by law to “the [reporting] entity’s filing-due date for the year”^[13]ITA s. 233.3(3)(b). It may be inferred that this language extends relief to the T1135 when the CRA has exercised its discretion under s. 220(3) to move the filing due date.

CPA Canada, the nation’s professional organization for accountants, has similarly indicated after discussion with the CRA that the T1135 deadline “will be the same as the revised due date” for the T1^[14]Federal government COVID-19 tax updates (March 23 update).

There is, of course, a great deal of uncertainty about the shape and timing of global recovery in the wake of COVID-19. It is possible we have not yet seen the worst of the pandemic, or the last word on tax deadline changes.