IRS Tax Deadline Delayed, Is It Enough?
Bowing to pressure that began nearly as early as tax filing season started, the IRS has finally agreed to postpone the due date for filing 2020 returns, to May 17 (IR-2021-59, 3/17/21), which doesn’t please all tax pros.
As you know, the initial due date for filing 2020 federal income tax returns was Thursday, April 15. However, on March 17 the IRS announced that it was delaying the deadline for one month, until May 15. Since of course May 15th falls on a Saturday, the actual filing deadline is Monday, May 17th. The extension applies automatically—taxpayers don’t have to lift a finger.
As a bonus to taxpayers, the delay also applies to payment of federal income tax liability. No interest, penalty or addition to tax will be imposed as long as the tax filer meets the May 17 deadline.
Citing the COVID-19 pandemic as the main reason for the delay, this marks the second year in a row that the IRS has postponed Tax Day. In 2020, it gave taxpayers three extra months—until July 15, 2020—to file their 2019 returns and pay any resulting tax.
“This continues to be a tough time for many people and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” said IRS Commissioner Chuck Rettig.
Note that some taxpayers have even more time to file their 2020 returns. Previously, the IRS set a deadline of June 15 for residents of Texas and others living in FENMA-designated disaster areas.
Now Here’s the Catch
The new extension isn’t all-encompassing. For instance, it doesn’t apply to corporations, partnerships or nonprofit organizations. What’s more, taxpayers don’t get any reprieve from estimated tax liability. The first quarterly installment of 2021 estimated tax remains due on April 15.
Taxpayers can still obtain an automatic filing extension to October 15 by filing Form 4868 by the new May 17 deadline. But the automatic extension won’t go past October 15. In addition, this extension only applies to filing returns—not to payment of tax.
It’s not yet clear if the extension allows taxpayers to make IRA contributions for the 2020 tax year after April 15. The IRS will likely soon provide guidance on this issue and other related matters.
Finally, the IRS postponement only applies on the federal level. Taxpayers and practitioners alike may still have to contend with an April 15 deadline for state income taxes unless the individual state changes it. Most states are, however, expected to follow the IRS’ lead.
More Pressure
The AICPA has been quite vocal in calling for an extension of Tax Day. Although it applauded the IRS change, it expressed disappointment that the extension didn’t cover estimated tax requirements and pointed out that practitioners still must calculate those payments by April 15.
“While we appreciate the IRS’ recognition that a filing deadline postponement is indeed necessary, the announcement is far too selective in who is receiving relief,” said AICPA President and CEO Barry Melancon. “In fact, the taxpayers who are most likely to benefit from this additional time are taxpayers who are able to meet the original filing deadline.”
The AICPA has proposed that the IRS further postpone the deadline for both filing returns and paying tax to June 15. We will watch out for the next move, if any, by the IRS.