Tax season just got longer … again.
For a second year in a row — and a week after Maryland extended its 2021 filing and payment deadlines — the IRS has announced that the federal filling due date for individual taxpayers has been extended to May 17, though many in the profession believe the extension doesn’t go far enough.
The IRS says the extension is necessary to help taxpayers who have been negatively impacted by the COVID-19 pandemic, but the agency is dealing with some hardships of its own. The passage of the $1.9 trillion federal pandemic relief package on March 11 has left the IRS scrambling to send out millions of stimulus checks and update forms to reflect tax changes included in the relief package.
“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,” IRS Commissioner Chuck Rettig said. “Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds.”
Here are the specifics of the tax filing extension, directly from the IRS’s March 17 announcement:
Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.
Individual taxpayers do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until Oct. 15 by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Filing Form 4868 gives taxpayers until October 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due. Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.
The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds associated with e-filed returns are issued within 21 days.
This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn’t subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.
The IRS said it will be providing formal guidance on the extension “in the coming days.”
‘Far too selective’
In a statement released after the IRS announcement, the American Institute of CPAs said millions of taxpayers will not benefit from the extension, especially considering the IRS’s decision to not extended the deadline for estimated tax payments.
“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 been advocating for extending the federal filing deadline to June 15.
“Americans, individuals and small businesses have been impacted immeasurably,” Melancon continued. “The fact is virtually all aspects of the federal government and state and local governments have also been impacted. A fair assessment might conclude, for a variety of reasons, that the IRS has been affected more than other federal agencies. I believe taxpayers and practitioners understand this. It is commendable that the IRS wants to demonstrate a return to normalcy. However, the IRS, through no fault of their employees, is seeing significant backlogs, inundated phone lines, unopened mail by the millions and systems sending out unwarranted notices. Extending all tax returns due to June 15 exhibits an understanding of the IRS’ impact on the American public.”
Make your voices heard
Maryland CPAs who would like to join the profession’s call for a further extension of the federal tax filing deadline can follow the suggestions in either this MACPA Connect post or this document.