The Internal Revenue Service announced on March 17 that they would extend the 2021 federal tax return filing and payment deadlines from April 15 to May 17. This ruling was followed up with clarification on March 29, when the IRS issued guidance and further details about the postponement. The extra time is intended to help ease the economic burden the pandemic has caused nationwide.
“The I.R.S wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic,” said Chuck Rettig, the IRS commissioner, in a statement on March 17.
How Does Tax Extension Affect Individuals?
This extension allows individuals to delay filing taxes until May 17, 2021. This postponement applies to any individual who files a federal individual income tax return or has a federal tax payment that would typically be due on April 15.
The IRS statement says the postponement also applies to the filing of any attachments in the Form 1040 series, including schedules, returns and other required attachments. Any elections that are required to be made on these forms or on any 1040 attachment forms will be included in the postponement as well.
The notice notes that the time for taxpayers to make contributions to any individual retirement accounts (IRAs) or health savings accounts (HSAs) are now automatically extended until May 17. It also automatically extends the postponement to claims for refunds or credits on federal income tax from prior years.
The IRS notes that this postponement applies exclusively to individuals, and does not include any other type of taxpayer, business or otherwise, and any other type of tax return. This postponement does not apply to the due date for estimated tax payments.
Rettig suggests that taxpayers do not unnecessarily delay filing their taxes this year, especially if they are anticipating receiving money back. This extension applies only to federal returns, and in 42 states and the District of Columbia. The state tax filings will be due April 15, 2021, as normal.
If you are filing in the state of California, the state income tax deadline has been postponed in accordance with the federal extension, and all individual tax returns will be due back by May 17, 2021. On May 17, penalties and interest on unpaid balances will begin to accrue.
Industry Pressure on the IRS To Extend Tax Deadline
The extension comes after months of the IRS facing pressure to be flexible in the face of the pandemic. Early this year, Rettig said there were no plans to postpone the tax deadline, even after the IRS opened filing season on February 12, instead of in January, as usual. The American Institute for Certified Public Accountants, as well as other industry groups and lawmakers, have been outspoken about the difficulties taxpayers will face in upholding the April 15 deadline.
In early March, the AIPCA penned a letter to the IRS, citing that the late filing tax season opening date, as well as the unavailability of many electronic tax forms, was a valid reason to postpone the filing deadline.
On March 16, a group of 104 lawmakers signed a petition stating similar reasoning and requesting an extension so taxpayers and tax advisers will have adequate time to complete the necessary forms this tax season.
Recent legislative rulings have also played a role in the extension, after the American Rescue Plan Act was passed on March 6. In addition to many other things, this $1.9 trillion relief law exempts $10,200 of unemployment compensation from taxes for those with an income below $150,000. The pandemic has left millions without jobs, therefore this recently passed exemption will have a large impact this tax season.
While many industry leaders and groups are praising the I.R.S for the extension, the AIPCA has criticized the extension for being too selective, citing the millions of small business owners, trusts, and corporations who may not benefit from the $1.9 trillion relief law that was recently passed due to the decision not to postpone the deadline for estimated tax payments as well.
Contact Our CPAs To File Your 2020 Taxes
Although the tax filing deadline has been extended for individuals, delaying filing unnecessarily should be avoided this tax season, as is typical for every tax season.
If you are looking for help filing your individual or business taxes, the team at Evolution Tax and Legal can help. The dual certification of our team, in both law and accounting, allows us to understand not only your tax needs but the reasoning behind the rules and regulations. Contact our experienced tax attorneys and CPAs for help filing your 2020 taxes today.