Tax Deadline 2021: Is The Extended IRS Tax Deadline Enough?

March 30, 2021

With the pressure almost at the start of tax filing season, the IRS finally agreed to extend the deadline for filing 2020 returns. Some tax community members believe that the IRS has not gone far enough in the tax deadline extension. But most taxpayers would enjoy the extra time. Taxpayers do not have to lift a finger as the extension applies automatically.

What Is The Extended Tax Deadline?

The initial deadline for filing 2020 federal income tax returns was Thursday, April 15. However, on March 17, the IRS announced that it extended the tax deadline for one month until May 15. Since May 15 falls on a Saturday, the actual filing deadline is Monday, May 17. If the taxpayers meet May 17 tax deadline, they will not be charged:

Penalty
Interest
Additional tax

As a bonus for taxpayers, the extension applies to payment of federal income tax liability. Some taxpayers are given even more time to file their 2020 returns. IRS set a deadline of June 15 for:

Residents of Texas
People living in FENMA-designated disaster areas

Why Did The IRS Extend The Tax Deadline?

The main reason for the extension is the COVID-19 pandemic. It is the second year in a row that the IRS extended the tax deadline. In 2020, taxpayers had additional three months to:

file their 2019 returns
pay any resulting taxes

COVID-19 pandemic continues to be a difficult time for most people. The IRS wants to do everything possible to help taxpayers navigate the unusual circumstances of the pandemic.

The Main Problems In The Extended Tax Deadline

The new extension is not all-encompassing as it does not apply to:

Partnerships
Corporations
Non-profit organizations

Taxpayers also do not get any reprieve from the estimated tax liability. Taxpayers can get an automatic filing extension until October 15 by filing Form 4868 by the new deadline. The first quarterly estimated tax installment for 2021 remains due on April 15.

The IRS would provide guidance on these and other related issues shortly. The IRS extension only applies on the federal level. However, most states are expected to follow the IRS's lead. Although AICPA applauded the IRS change, it also:

pointed out that the practitioners still must calculate their payments by April 15
expressed disappointment that the extension did not cover estimated tax requirements

The automatic extension will not go past October 15, and this extension only applies to filing returns. It is not yet clear whether the extension would allow taxpayers to make IRA contributions for 2020 after April 15. Practitioners and taxpayers might have to contend with April 15 deadline for state income taxes unless the individual state changes it.

The Takeaway

We appreciate the IRS's recognition that a filing deadline extension is essential. But, the announcement is far too selective about who is getting relief. Taxpayers who will benefit from this extension are those who can meet the original tax deadline. The AICPA has proposed that the IRS further extend the deadline for filing returns and paying taxes to June 15.

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