The Treasury Department and Internal Revenue Service announced yesterday that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021, giving taxpayers additional time to file returns and pay any outstanding levies. The filing extension will give taxpayers additional breathing room to meet their tax obligations in what is becoming one of the most complicated tax seasons in decades.
This change comes after numerous calls from accountants and congressional leaders to delay the due date as new legislation and pandemic-related work changes disrupt taxpayer plans. Among the changes this tax season are last-minute amendments to the $1.9 trillion stimulus bill signed into law earlier this month that give filers a new tax exemption on up to $10,200 of jobless benefits. The individual tax return, Form 1040, is also the mechanism for people to claim any missing $1,200 or $600 stimulus payments from last year. Besides the disruptions from the pandemic, the changes in tax law will mean some filers may need to resubmit their returns to ensure that they are compliant with newly enacted tax laws.
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 to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the May 17, 2021 deadline can work with their E. Cohen advisor to request a filing extension until October 15, 2021. The extension gives taxpayers until October 15, 2021 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.
This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15, 2021. The AICPA and congress are still working on an additional extension as well as an extension for estimated 2021 first quarter estimates to at least May 17, 2021. We will provide additional guidance as soon as we are made aware of any changes. 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 is not subject to income tax withholding, including self-employment income, interest, dividends, alimony, or rental income.
The federal tax filing deadline postponement to May 17, 2021, only applies to individual federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2021, not state tax payments, deposits, or payments of any other type of federal tax. Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. States are moving quickly to provide relief to residents and conform with fast moving tax law changes. However, it is unclear which states will delay their income tax deadlines. At the moment, Maryland is the only state that has officially delayed their income tax filing deadline to July 15, 2021. We will continue to monitor state announcements and notify clients if any adjustments are made.
Even with the new deadline, we are urging taxpayers to consider filing as soon as possible, especially those who are owed refunds. To learn more about the IRS’s announcement to extend the federal tax filing deadline contact your E. Cohen advisor at 301-691-3600 or email us at info@ecohen.com to learn how these changes may impact you.
