The IRS announced that the federal income tax filing deadline for individuals for the 2020 tax year is extended from April 15, 2021, until Monday, May 17, 2021.
The IRS extended the deadline to provide relief to taxpayers facing challenges as a result of the COVID-19 pandemic and because it’s grappling with a rising backlog of 24 million unprocessed returns.
As part of its announcement, the IRS stated it would soon issue additional guidance about the deadline extension.
An overview of the extension follows.
To Whom Does the New Deadline Apply?
This postponement applies to the 2020 income tax return for individual taxpayers, including those who pay self-employment tax.
Are There Penalties or Interest for Payments Deferred to the New Deadline?
Individual taxpayers can postpone federal income tax payments for the 2020 tax year to May 17, 2021, without penalties and interest, regardless of the amount owed.
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.
Do Additional Forms Need to Be Filed to Utilize the Extension?
Individual taxpayers don’t need to file any forms to qualify for this automatic federal income tax filing and payment relief.
If you need additional time to file beyond the May 17 deadline, you can request an extension to October 15 by filing Form 4868.
Filing Form 4868 gives you until October 15 to file your 2020 income tax return but doesn’t grant you an extension of time to pay taxes due. You should pay the federal income tax due by May 17 to avoid interest and penalties.
Is the Estimated Payment Deadline Extended?
This relief doesn’t apply to 2021 first quarter estimated tax payments that are due on April 15, 2021. These payments are still due on that date.
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 if your income isn’t subject to income tax withholding. This includes self-employment income, interest, dividends, prize winnings, alimony, and rental income.
Most individual taxpayers calculate their quarterly estimated payments based on a required percentage of their prior year tax liability to avoid the underpayment of estimated tax penalty.
Consequently, we’re continuing to work towards completing our clients’ 2020 individual tax returns by April 15 to help determine the amount of their first quarter estimated payment required to be paid by April 15.
Are State Tax Returns Included in the Extension?
The federal tax filing deadline postponement to May 17, 2021, applies to only individual federal income returns and tax payments otherwise due April 15, 2021.
It doesn’t apply to state tax returns or payments of any other type of federal tax. Some states have announced that they expect to conform to the IRS deadline extension, but it is important to verify with each state you have a filing obligation to see if their deadline has changed.
State filing and payment deadlines vary and aren’t always the same as the federal filing deadline.
When Should I Plan to File Taxes?
File as soon as possible. This extended deadline is optional. If you’re ready to file, you’ll want to do so quickly—especially if you’re due a refund.
Does the Extension Impact Tax Relief for States Affected by Winter Storms?
Earlier this year, the IRS announced relief for victims of the February winter storms in Texas, Oklahoma, and Louisiana.
These states have until June 15, 2021, to file various individual and business tax returns and make tax payments. The extension to May 17 doesn’t affect the June deadline.
We’re Here to Help
To learn more about the extension or for help with tax filing and planning, contact your Moss Adams professional.