IRS (Partially) Extends the April 15 Deadline

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Late yesterday, the IRS reversed its stance and extended the April 15, 2021 filing deadline for individual income tax returns (Forms 1040). Those returns, and payments of remaining 2020 tax liabilities that accompany them, instead are due by May 17, 2021. No action is needed on the part of taxpayers to obtain this one-month reprieve; it is automatic. Those who need additional time to file beyond May 17 should file an extension (and pay the remaining 2020 tax expected to be due) by that date, as they normally would do by April 15.

That summarizes what we know has changed, as shared in IRS release IR-2021-59. But there are a number of other important tax return filings due by April 15 that have not changed. Among them:

  1. Trust returns, estate income tax returns, and corporations have not been given the same pardon that individual returns received. Thus, the filing deadline for most Forms 1041 and 1120 remains April 15.
  2. The federal deadline extension does not have any impact on most state income tax returns. Maine and Massachusetts authorities have already indicated plans to follow the IRS changes with certain filings, and other states are considering it. However, after the IRS insisted repeatedly for weeks that it would not change the filing deadline, most states’ lawmakers and revenue departments may have been surprised by this abrupt reversal. Because most states’ tax returns piggy-back strongly off the corresponding federal returns, we need to perform nearly as much work as usual to accommodate states’ requirements, under the assumption that many states’ deadlines will not move.
  3. The IRS release specifically states that its “relief does not apply to estimated tax payments that are due on April 15, 2021. Those payments are still due on April 15.” This primarily describes first quarter estimated tax payments for the year 2021. In many cases, one year’s tax payments are based on the prior year’s tax, and to quantify the first payment of 2021 tax, we need an accurate computation of 2020’s tax.

All of these thoughts above serve to remind us that this May 17 extension is not as generous as it seems, and it would be a mistake to take our feet off the April 15 gas pedal now.

The BNN tax team is hard at work preparing tax returns while maintaining our high standard of excellence. For a number of reasons, we believe the most appropriate practical approach is to view the April 15 to May 17 “shift” as the exception, rather than the rule. We ask for your support in promptly sharing tax documents with us immediately, so we have adequate time to prepare extensions and returns, and compute taxes due – understanding that yesterday’s concession is not as comprehensive as one might think.

It is our honor to serve you. Please reach out to your BNN tax advisor with any questions regarding how this change impacts you.

For more information, please contact your BNN tax service provider at 800.244.7444.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, investment, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.