For the second year in a row, the federal tax deadline has been extended by the IRS for individuals, but a local certified public accountant warns that estimated tax payments are still due next week.
The Treasury Department and IRS announced last month that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15 to May 17, 2021.
“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 news release. “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.”
Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15 to May 17, 2021, without penalties and interest, regardless of the amount owed, the IRS said. 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, and individual taxpayers will automatically avoid interest and penalties on the taxes paid by that date.
“The main thing that’s going to affect 90% of the people out there is that May 17 is the due date for individual tax returns on the federal level and the state level,” said Mike Pierce, CPA and partner at Pierce Keller & Associates PLLC. “There are no changes to corporations and partnerships, though you can still file extensions if you don’t have time to get it done, but the drop dead date for filing on time is May 17 for personal federal and state taxes. You can obviously file an extension like you always could until October if you don’t meet that May 17 date.
“Now, one of the things that people aren’t happy about is that your first estimated payments, which a lot of people have to pay, is still due on April 15 for 2021. They did not extend that due date, so we’re looking at peoples’ first estimate for 2021 being due on April 15, and there’s going to be a lot of people who haven’t even filed, and that’s usually how they get a bearing on what they’re going to pay in estimates. But that’s another story, I suppose. The IRS said there’s just too many people out there with a lot of money that don’t need a 30-day free ride.”
Regarding the estimated due taxes, the IRS said in its news release, “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 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 submitted to the IRS by their employer.”
In other tax news, Pierce said anyone who collected unemployment insurance payments last year and already filed their tax returns should still be expecting to get their withholdings back from the first $10,200 they received. That is because the recently passed American Rescue Plan Act exempted that amount in federal unemployment from being taxed for households with a modified adjusted gross income (AGI) of less than $150,000.
“The state’s not forgiving; the state’s going to tax it all,” Pierce said. “The feds are forgiving $10,200 up to an income of $150,000. Our software people and the IRS are on board now (with the same software), so we can file returns and exempt the $10,200, which helps a lot for some people.”