Lawmakers at a House committee hearing disagreed on the merits of raising taxes while the U.S. economy recovers, but were unified in criticizing the IRS and Treasury for declining to extend a tax deadline.
The IRS announced March 17 that, following enactment of the American Rescue Plan Act of 2021 (P.L. 117-2), the April 15 tax return filing season deadline would be extended to May 17, but that the April 15 deadline for making the first of the year’s quarterly estimated tax payments would remain in place. Lawmakers from both parties at a March 23 House Financial Services Committee hearing weren't pleased with that decision.
“It’s very important that you do the same for the first of the four Form 1040-ES estimated tax payments,” Rep. Brad Sherman, D-Calif., said. “That is usually prepared at the same time and is so important to gig workers.”
Rep. Bill Huizenga, R-Mich., read a letter from a constituent who complained that the IRS’s decision was “ridiculous,” contending that filing the Form 1040 is necessary for many taxpayers to determine how much they need to pay for their quarterly estimated payments. “Many small businesses need to know what their tax liability is, in some cases to borrow cash to make that first estimated payment,” he said.
Treasury Secretary Janet Yellen repeated the same defense invoked by IRS Commissioner Charles Rettig at a March 18 House Ways and Means Oversight Subcommittee hearing, explaining that the logic behind shifting one date but not the other is “based on the idea that it’s mainly high-income taxpayers who make estimated payments, and that they’re able to file by April 15.”
At the March 18 hearing, Rettig was emphatic that the IRS wouldn't change the quarterly estimated tax payment deadline, arguing that the penalty for late estimated tax payments is minuscule.
Speaking at a March 23 Tax Executives Institute virtual conference, Sunita Lough, IRS deputy commissioner for services and enforcement, explained that the IRS’s decision to extend the filing season was intended to assist low- and middle-income taxpayers who might be facing challenges in filing their returns. As for postponing estimated tax payments: “We really don’t see a need for doing that,” she said.
Barry Melancon, president and CEO of the American Institute of CPAs, criticized the IRS’s decision in a March 17 statement: “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.”
Tax Yikes
Several Republican members at the March 23 hearing took the opportunity to criticize the Biden administration for eyeing significant tax increases as pay-fors for its initiatives on infrastructure spending, mitigating climate change, and addressing wealth inequality.
House Financial Services Committee ranking member Patrick T. McHenry, R-N.C., warned that raising taxes would impede economic growth and hinder the economic recovery from the COVID-19 pandemic, while Rep. Barry Loudermilk, R-Ga., questioned the wisdom of passing a $1.9 trillion spending bill because the economy was in crisis, only to argue now that the economy is strong enough to handle tax increases.
Yellen responded that the administration’s tax proposals would be targeted in such a way that they wouldn’t hurt small businesses or ordinary Americans, and that the revenue raised would be used to pay for investments that will “make our economy more productive, raise wages, [and] create good jobs.”
Shell Collection
Yellen also reiterated Treasury’s support for implementing the Corporate Transparency Act, which was enacted in January as part of the National Defense Authorization Act (H.R. 6395). That provision requires corporations and limited liability companies to report beneficial ownership information to Treasury’s Financial Crimes Enforcement Network in an effort to crack down on the use of shell companies for money laundering and other illicit activities.
“It is one of our highest priorities to implement this promptly and to get it right,” Yellen said. Treasury has both a hiring plan and a plan to set up the necessary database to collect the required information, she said, adding, “We recognize that significant resources will be required, and we’re trying to obtain them.”
Emily L. Foster contributed to this article.
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