The IRS extended the 2021 return filing and payment deadlines from April 15 to May 17, to the cheers of lawmakers and some hesitant thumbs-up among tax professionals.
The change follows weeks of pleas from lawmakers and tax industry groups to extend the deadlines in response to the continuing COVID-19 pandemic, and the IRS’s administrative and Congress’s legislative responses to its far-reaching effects.
News of the extension started circulating the afternoon of March 17, followed by two top House taxwriters lauding the IRS for responding to their entreaties to extend the filing deadline.
“This extension is absolutely necessary to give Americans some needed flexibility in a time of unprecedented crisis,” House Ways and Means Committee Chair Richard E. Neal, D-Mass., and Oversight Subcommittee Chair Bill Pascrell Jr., D-N.J., said in a joint statement.
However, the IRS noted in a statement that the extension doesn’t apply to quarterly estimated tax payments due on April 15, including self-employment income, interest, dividends, alimony, and rental income.
IRS Commissioner Charles Rettig said in another statement, “Even with the new [filing and payments] deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds.” Electronically filing returns may also speed any unpaid economic impacts payments (EIPs) that an individual is still owed, he said.
Neal and Pascrell said, “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.”
Rettig is scheduled to testify before the Oversight Subcommittee March 18.
Pros and Cons
Tax professionals expressed mixed feelings about the IRS’s announcement.
“I’m still thrilled at the additional time for filing without having to file an extension form,” said Phyllis Jo Kubey, president of the New York State Society of Enrolled Agents.
Kathy R. Hettick of Hettick Accounting & Tax LLC called the extension “absolutely necessary.” The extra filing time should take the pressure off, Hettick said, as she’s “spending an enormous amount of time” reading IRS updates and rules and helping small business clients understand the Paycheck Protection Program and the employee retention credit.
“We were very far behind in clients bringing in their tax information,” said Jeffrey A. Porter of Porter & Associates CPAs, in part because of an ice storm and flooding that hit his West Virginia practice. “There is no way we could have completed the returns we normally did by April 15.”
Damien Martin of BKD CPAs & Advisors said the deadline extension “has been a very divisive issue for tax professionals and a frequent topic of conversation.” Opinions differ based on geography, size, and makeup of the practice; implementation of remote working arrangements; and other firm-specific concerns, he said.
Jessica L. Jeane of the National Society of Accountants said her group still supports a June 15 extension.
“I fear most will find it not enough,” Jeane said of the May 17 grace period. Tax professionals’ workloads have become so great that many are no longer taking new clients, she said.
“Of course, the downside of this is that it’s another month of busy season,” said Jeffrey Levine of Buckingham Wealth Partners. “And no matter how much it gets extended, there’s generally no rest until it’s over and all the returns are done.”
States and Software
The IRS’s announcement is just part of what tax professionals need to extend their filing season.
“Most [tax pros] are waiting for the other shoe to drop, so to speak, to find out if state and local taxing authorities will follow the federal postponement,” if those states don’t automatically conform to federal tax deadlines, Martin said.
It will be interesting to see if states follow the federal extension when it’s only a month, Martin added.
Levine said, “It’s tough to catch up when you’re still waiting for software providers to code in the latest changes.”
Software vendors will need to program, test, and distribute applications for not only the extended filing and payment deadlines, but tax code changes and adjustments contained in the American Rescue Plan Act of 2021 (P.L. 117-2) and previous tax-related coronavirus legislative packages.
“There’s a natural tendency for people to delay getting their info to their CPAs until they absolutely have to,” Levine said. Procrastination is likely to intensify a busy first half of May, he added.
Martin said IRS penalty relief — not mentioned in the IRS announcement — would be welcomed by practitioners and taxpayers alike.
Kubey said she’s analyzing clients’ filing status — considering married filing separately status for some couples whose adjusted gross incomes, when counting the new unemployment exclusion, EIPs, and so on, make the option more tax-favorable.
“We all saw [the extension] coming,” Hettick said. “So it would have been nice had the IRS announced this sooner so we had more time for planning.”
“I guess we will be grateful to get what we get,” Hettick said.