On March 17, 2021, the IRS announced an automatic extension of the April 15 due date to May 17 for certain taxpayers. This follows requests from members of Congress and industry associations to provide due date relief to taxpayers that are continuing to deal with the impact of the COVID-19 pandemic. The relief is limited to individual taxpayers and only covers some of the tax return filings and payments that are due on April 15. As we unpack this guidance, here are the key items to be aware of.
What has been extended?
So far, the IRS has issued a press release but not the formal notice implementing this due date extension. Based on the currently available guidance, this extension applies solely to individual 2020 federal income tax returns and payments due with those returns. The due date for those tax filings and payments is automatically extended from April 15 to May 17. Please note that this extension only directly applies to federal income tax returns and payments, so the rules applicable to state and local tax filings will need to be considered separately.
This relief will likely be most impactful to individual taxpayers that are grappling with the tax changes enacted as part of the American Rescue Plan Act of 2021 or those who are finding it difficult to arrange for their tax filings and payments. After more than a year of turmoil, the COVID-19 pandemic is still impacting taxpayers across the country. This due date extension provides one form of relief albeit in very limited form.
What hasn’t been extended?
The IRS release narrowly focuses on individual income tax returns and payments for the 2020 tax year as being eligible for this extension. However, there are many other types of tax returns, payments, and actions that are also due by April 15. Those items all appear to retain their current due dates. Specific items of note that appear to be excluded from relief include:
- Tax returns and payments for businesses, trusts, estates, gift taxes, and payroll taxes
- Estimated tax payments for the first quarter of 2021 for both businesses and individuals
- Certain actions, such as contributions to individual retirement accounts (IRAs), which must be completed by April 15
What should I do now?
The April 15 and May 17 due dates are now less than one month and two months away, respectively. That provides a very limited amount of time for taxpayers to complete their tax returns, prepare extensions, and make the requisite tax payments. Individual taxpayers that fit within the automatic due date extension may nonetheless find it more advantageous to proceed with return preparation or extensions based on the normal April 15 deadline. That approach would simplify their filings since state tax returns may remain due on April 15, and federal taxable income may need to be calculated to file these returns. In addition, taxpayers paying estimates may need to know their 2020 tax liability to pay their first-quarter 2021 estimate that remains due on April 15. Any taxpayers who anticipate needing additional time beyond April 17 or May 17 to file individual income tax returns should move quickly to file extensions, which will move the final due date to October 15.
For all other tax returns, payments, and actions that are due by April 15, we recommend continuing with normal processes. At this point, further due date extensions don’t appear to be imminent; taxpayers should proceed on the assumption that the current dates will remain in effect.
Other extensions due to disaster declarations
Taxpayers in Louisiana, Oklahoma, and Texas should consider the impact of disaster-related tax relief on their tax filings. In response to natural disasters, the IRS does provide blanket due date relief to affected taxpayers. Based on winter storms, the extensions currently in effect include:
- Louisiana – Extension to June 15 for certain tax filings, payments, and actions required between Feb. 11, 2021 and June 15, 2021
- Oklahoma – Extension to June 15 for certain tax filings, payments, and actions required between Feb. 8, 2021 and June 15, 2021
- Texas – Extension to June 15 for certain tax filings, payments, and actions required between Feb. 11, 2021 and June 15, 2021
Taxpayers in those states should carefully review the IRS guidance to confirm whether they are included in the scope of affected taxpayers and the applicable tax filings and payments that are subject to the extension.