IRS Delays Tax Filing Deadline Until May 17

The Internal Revenue Service is pushing back the tax-filing deadline until May 17 after heavy pressure from Congress and tax and accounting groups.

The move will give taxpayers and tax professionals an extra month after the original deadline of April 15. May 15 falls on a Saturday, so the date was moved up until Monday, May 17. Last year, the IRS delayed the deadline by three months until July 15, but that threw off some of the other quarterly deadlines for many taxpayers and tax pros. The IRS has been busy this year distributing the $600 Economic Impact Payments from last December’s Consolidated Appropriations Act and the $1,400 stimulus payments from the American Rescue Plan Act that passed earlier this month, and had to delay the start of tax season by about three weeks. The agency has also been dealing with all the changing provisions from the CARES Act and the other pieces of legislation aimed at helping Americans deal with the economic fallout from the COVID-19 pandemic.

Lawmakers in Congress from both parties and accounting professional groups like the American Institute of CPAs, the National Association of Tax Professionals and the National Conference of CPA Practitioners have asked for delays of two to three months, and the one-month extension represents a compromise.

The Treasury Department and the IRS confirmed the decision late Wednesday afternoon, saying the federal income tax filing due date for individuals will be automatically extended from April 15 to May 17. The IRS is going to be providing formal guidance in the coming days.

“This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” said IRS Commissioner Chuck Rettig in a statement. “Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds, and it can help some taxpayers more quickly receive any remaining stimulus payments they may be entitled to.”

House Ways and Means Committee chairman Richard E. Neal, D-Massachusetts and Ways and Means Oversight Subcommittee chairman Bill Pascrell, Jr., D-New Jersey, applauded the decision Wednesday. They were among the influential lawmakers who had pushed for the extension (see story).

“This extension is absolutely necessary to give Americans some needed flexibility in a time of unprecedented crisis,” Neal and Pascrell said in a statement. “Under titanic stress and strain, American taxpayers and tax preparers must have more time to file tax returns. And the IRS itself started the filing season late, continues to be behind schedule, and now must implement changes from the American Rescue Plan. We are gratified that the IRS has recognized the need and heeded our calls for additional time, and while we are pleased with this 30-day extension, we will continue to monitor developments during this hectic filing season. We look forward to hearing directly from the Commissioner tomorrow afternoon to discuss how the IRS is managing this filing season and the justification for the duration of this extension.”

They plan to convene a hearing Thursday with Rettig on the tax-filing season and could ask for a further extension later this season.

A Senate leader also praised the move. “This filing season has been particularly challenging for lowincome taxpayers and small tax preparers as they navigate the pandemic, and I support extending the filing deadline for individuals to May 17,” said Senate Finance Committee chair Ron Wyden, D-Oregon. “With Democrats enacting tax forgiveness for jobless benefits, which tens of millions of Americans received in 2020, one additional month to file is especially important for workers and their families.”

The senior Republican on Neal and Pascrell’s committee chided Democrats about the need to extend tax season, blaming it on the new stimulus package from the Biden administration. “Democrats’ $1.9 trillion bill continues to cause chaos, to the point that delaying tax filings in order to accommodate the law’s provisions may be a wise decision,” said Rep. Kevin Brady, R-Texas, in a statement. “Yet this is where the problems begin, not where they stop, as the agency will be under enormous strain to implement farranging socialist policies, to which Democrats are now seeking to add trillions of dollars in new tax hikes. If you thought tax day during a surprise pandemic was hard, wait until you see tax day during a pandemic, with huge non-emergency regulations and tax hikes from Democrats.”

Individual taxpayers can now postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, no matter what amount is owed. The postponement applies to individual taxpayers, including people who pay self-employment tax. Penalties, interest and additions to tax will start 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.

Taxpayers won’t need to file any forms or call the IRS to qualify for the automatic federal tax filing and payment relief. Individuals who need extra time to file beyond the May 17 deadline can ask for a filing extension until Oct. 15 by filing Form 4868 through their tax preparer or DIY tax prep software, or by using the Free File link on Filing Form 4868 gives taxpayers until Oct. 15 to file their 2020 tax return but doesn’t provide an extension of time to pay any taxes that due. The IRS said taxpayers should pay their federal income tax due by May 17, 2021, so as to avoid extra interest and penalties.

Despite the extension, the IRS is urging taxpayers who are due a refund to file as quickly as possible. Most tax refunds associated with electronically filed returns are sent within 21 days.

The relief doesn’t apply to estimated tax payments that come due on April 15. Those payments are still going to be due on April 15. The taxes have to be paid as taxpayers earn or receive income during the year, either via withholding or estimated tax payments. Typically, estimated tax payments go out quarterly to the IRS from people whose income isn’t subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and sent to the IRS by their employer.

The federal tax-filing deadline postponement to May 17 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 or deposits or payments of any other type of federal tax. Taxpayers will still need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines can vary and aren’t always the same as the federal tax deadline. The IRS is asking taxpayers to check with their state tax agencies for those kinds of details.

The AICPA complained that the relief doesn’t go far enough and doesn’t apply to many taxpayers who will need help the most. “While we appreciate the IRS’ recognition that a filing deadline postponement is indeed necessary, the announcement is far too selective in who is receiving relief,” said AICPA president and CEO Barry Melancon in a statement. “In fact, the taxpayers who are most likely to benefit from this additional time are taxpayers who are able to meet the original filing deadline.”

The AICPA pointed out that the relief doesn’t include estimated tax payments that are due April 15 and apply to millions of small business owners and individuals who pay estimated taxes, including trust income tax payments and return filings on Form 1041, and corporate income tax payments and return filings on various 1120 forms.

“Americans, individuals and small businesses have been impacted immeasurably,” said Melancon. “The fact is virtually all aspects of the federal government and state and local governments have also been impacted. A fair assessment might conclude, for a variety of reasons, that the IRS has been affected more than other federal agencies. I believe taxpayers and practitioners understand this. It is commendable that the IRS wants to demonstrate a return to normalcy. However, the IRS, through no fault of their employees, is seeing significant backlogs, inundated phone lines, unopened mail by the millions and systems sending out unwarranted notices. Extending all tax returns due to June 15 exhibits an understanding of the IRS’ impact on the American public.”

Earlier this year, after the disaster declarations issued by the Federal Emergency Management Agency (FEMA), the IRS granted relief to victims of the February winter storms in Texas, Oklahoma and Louisiana. Those states were given until June 15 to file various individual and business tax returns and make tax payments. The new extension to May 17 doesn’t affect that June deadline.

In letters to the Treasury Department and the IRS, the AICPA stressed the benefits of extending the payment and filing deadline to June 15 for all taxpayers, particularly small businesses, and tax
practitioners and would help many states maintain their revenue levels within their current fiscal years. Failure to include estimated payments would cancel out any benefit of a postponement, the AICPA argued, as tax prep work has to be done anyway to calculate estimated payments. More than 9.5 million individual returns filed in for the 2018 tax year included estimated payments.

“This selective decision by the IRS unfortunately creates more bureaucracy and confusion and is out of sync with real world stresses that taxpayers, tax practitioners and small businesses are dealing with,” said Melancon.

Some tax professionals have expressed mixed feelings about extending tax season again this year (see story). But the National Conference of CPA Practitioners expressed its appreciation for the May 17 extension. “The past year has been extremely trying for everyone, especially for those who prepare income tax returns and advise businesses,” said NCCPAP national president Mark Stewart in a statement. “Since the beginning of the COVID crisis, CPAs have been under extreme pressure helping both our small business and individual clients with various government programs, as well as recent tax law changes, and how they can make use of them. Furthermore, the recent effect of the exemption of the first $10,200 of unemployment compensation for lower-income taxpayers has been a monumental change — one rarely seen in March, in the middle of tax season — that retroactively changes prior year tax law. Practitioners as well as software providers desperately needed this extra time to adjust for these changes.”

Many taxpayers are still waiting for issues involving their 2019 tax returns to be resolved. “The IRS is still backed up dealing with 2019 returns,” said NCCPAP executive vice president Frank Sands in a statement. “Many people who are due refunds — for example, because their spouse passed away and the return was pulled for a manual review or those who had to file a paper return due to identity theft issues — have yet to receive them.”

Taxpayers who can’t get their 2019 tax return processed by the IRS were unable to receive the stimulus money they were entitled to, and therefore aren’t able to file their 2020 return accurately, NCCPAP noted. A recent letter sent to the IRS, signed by over 100 members of Congress, called for an extension of the April 15 due date, citing among other things, that the IRS is only answering one out of four calls made by taxpayers.

Some tax professionals will see little relief for their clients or at their own firms. “The payments are still going to be due,” said Ken Rios, principal in the tax department at Kaufman Rossin. “What they’re doing is extending it to May 17 to give people more time to organize their documentation because of COVID and get all their ducks in a row. From a professional standpoint, if I asked my staff if they’re welcoming it, it just extends our busy season. We stay busy, but not necessarily busier. We’re already doing the same work. Any planned vacation past April 15 will have to be postponed, I guess. The interesting thing is they only extended it for individuals, but not corporations. There’s no relief for corporations, just for individuals.”

Until Wednesday, many of the calls for extending the filing deadline had come from Democrats in Congress like Neal and Pascrell, but on Wednesday, at least one prominent Republican also urged the IRS to push back Tax Day. Sen. Mike Crapo, R-Idaho, the ranking member of the Senate Finance Committee, issued a statement ahead of the announcement. “There is growing bipartisan support for the IRS to extend the filing deadline,” said Crapo. “The various coronavirus relief programs created over the last year, including the bill signed into law just last week, have resulted in a large amount of extra paperwork for taxpayers this year and have required tax preparation firms to constantly update their systems. The IRS should strongly consider extending the filing deadline, giving taxpayers and businesses more certainty and time to receive accurate guidance and file returns properly.”

Ken Rios, JD, is a Tax Principal at Kaufman Rossin, one of the Top 100 CPA and advisory firms in the U.S.