Alerts and Updates

IRS Extends 2020 Tax Filing and Payment Deadline

March 18, 2021

Interest and penalties will accrue after May 17.

The Treasury Department and the IRS announced on March 17 a one-month extension for filing 2020 federal individual income tax returns, free of interest and penalties, which would otherwise be due April 15. Interest and penalties on underpayments and late payments of tax will begin to accrue on May 18.

Individual taxpayers will have until May 17 to file and pay 2020 federal income taxes. Interestingly, this relief does not apply to first quarter 2021 estimated tax payments that are still due on April 15, 2021. This one-month delay is less than the extra time the IRS provided last year, when the filing deadline was delayed to July 15. Regardless, it should help taxpayers timely address 2020 tax filings, including changes recently made by the American Rescue Plan, which we wrote about in this Alert.

Observation―While we certainly appreciate the Treasury and IRS’s tax filing and payment deferral for tax year 2020, the failure to include the 2021 estimated tax installment payment largely cancels any benefit of the deferral. In order to accurately calculate the 2021 estimated tax payment to avoid underpayment penalties, you need to prepare most, if not all, of the 2020 tax return.

Absent any guidance to the contrary, second-quarter 2021 estimated payments remain due on June 15. It is important to note that the right to defer filing/payment does not apply to other taxes such as payroll taxes, gift taxes, estate taxes or excise taxes.

Presently, taxpayers can still request by April 15 a six-month extension (or by May 17 a five-month extension) to file returns by October 15 if the May 17 deferral is insufficient. However, interest and penalties will accrue after May 17. Whether the Treasury or the IRS will be lenient in the imposition of penalties and interest after May 17, and if so, for how long, are still to be determined.

This filing and payment extension, at this time, applies to federal income tax returns only. Such extension does not automatically apply to your state and local tax filing and tax payment deadline. States are resistant to push back April filing deadlines (although most did during the 2019 filing season) as deferred filing dates interfere with the states’ budget processes. If states do not follow the federal filing extension, taxpayers will still need to file their state returns by April 15, unless properly extended. At this time, Maryland is the only state to extend its filing deadline, to July 15. Check with state tax agencies for details. TAG continues to monitor this fluid situation.  

TAG’s Perspective

For some taxpayers, individuals and businesses alike, collecting tax material and coordinating the preparation of tax returns in this environment continues to be very challenging. The IRS and Treasury announcement has now provided tax filing and payment relief by extending the April 15 filing and payment deadline by one month.

We continue to encourage clients to submit their tax material to us in order to file sooner and secure refunds, to implement last minute 2020 tax saving strategies, to timely compute first quarter 2021 tax obligations (still due April 15) and to project 2021 tax to assist with cash flow management and planning.

For More Information

If you would like more information, contact the practitioner with whom you are in regular contact or any of the practitioners in the Tax Accounting Group. For information about other pertinent tax topics, please visit our publications page.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.