The IRS has just announced limited relief for certain taxpayers due to the COVID-19 pandemic (Notice 2020-17). However, as currently drafted, this relief would not apply to US citizens or residents residing abroad.
In particular, section III of Notice 2020-17 grants relief to any person with a Federal income tax payment due April 15, 2020 (an “Affected Taxpayer”), by extending the due date of such payment to July 15, 2020. A US citizen residing abroad is automatically granted a 2-month extension under Treas. Reg. 1.6081-5(a)(5) for the filing of their income tax return and the payment of any US tax. Therefore, a US citizen or resident residing abroad does not otherwise have a Federal income tax payment due on April 15, 2020, and would, therefore, appear not to be an Affected Taxpayer as defined under the Notice eligible for relief.
In any case, the utility of the relief provided under Notice 2020-17 to US citizens or residents residing in Canada, even if applicable, would be limited. The relief provided under the Notice is limited only to delaying the tax payment and not the filing date. In the vast majority of cases, Canadian resident-US citizens are already not subject to any US tax payable after the application of foreign tax credits.
Rather, for many Canadian resident US citizens, their exposure to US tax-related penalties relate to their information reporting obligations, such as FBAR filings for the reporting of their Canadian bank accounts, Form 5471 filings for their Canadian businesses, and Form 3520/Form 3520-A filings for their Canadian family trusts. The late filing of these information returns carry substantial potential penalties. Notice 2020-17 does not provide a filing extension for the due dates of these information filings.