Extension will give taxpayers more time to grapple with late law changes, pandemic
WASHINGTON—The Internal Revenue Service delayed the main April 15 tax-filing and payment deadlines for individuals until May 17, giving taxpayers and preparers a bit of breathing room in an unusually complicated tax season.
The move comes after lawmakers and accountants urged the government to allow more time to complete 2020 tax returns and adjust to tax-law changes implemented during the pandemic.
The tax-filing season started later than usual and has been challenging for taxpayers dealing with the effects of last year’s economic disruptions and late changes to the tax law. Typical in-person assistance, which can be particularly valuable for low-income filers, has been more complicated this year as well.
The automatic extension applies to individual returns and payments for 2020 that are due on April 15; they will be extended to May 17 without penalties and interest. It doesn’t apply to 2021 estimated-tax payments due on April 15, the IRS said late Wednesday. Many questions remain unanswered, including whether states will follow suit and extend their income-tax deadlines.
The IRS, seeking a return to something resembling its normal schedule after 2020, had been reluctant to change the deadline. It delayed the start of the filing season to Feb. 12 from the typical late January date so it had time to implement tax-law changes that Congress wrote in December. Calls for another delay came this month as Congress changed 2020 tax law again.
Notably, the coronavirus relief package that President Biden signed into law last week retroactively changed the tax rules for unemployment benefits received in 2020, making the first $10,200 exempt from taxation for tax filers making less than $150,000.
“We are gratified that the IRS has recognized the need and heeded our calls for additional time, and while we are pleased with this 30-day extension, we will continue to monitor developments during this hectic filing season,” Reps. Richard Neal (D., Mass.) and Bill Pascrell (D., N.J.) said in a statement.
Bloomberg News first reported the delay. The IRS will release further details in the coming days.
“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,” IRS Commissioner Charles Rettig said in a statement.
Last week’s late change in the tax law compounded difficulties facing tax preparers, taxpayers and the IRS, which is still working through a backlog of 2019 tax returns. The government has received 18% fewer tax returns through early March this year compared with 2020.
The IRS hasn’t yet offered guidance for people who already filed their tax returns and included unemployment benefits as taxable income. These filers have been told only not to send in amended returns yet.
Lawmakers, including Messrs. Neal and Pascrell, and accountants had been pressing the IRS to push back the April 15 deadline. Until now, Mr. Rettig had resisted, saying there was no need for a delay. Mr. Rettig is set to appear Thursday before the House Ways and Means subcommittee chaired by Mr. Pascrell.
More than 100 House members signed a letter this week urging the delay.
“The various coronavirus relief programs created over the last year, including the bill signed into law just last week, have resulted in a large amount of extra paperwork for taxpayers this year and have required tax preparation firms to constantly update their systems,” Sen. Mike Crapo of Idaho, the top Republican on the Senate Finance Committee, said earlier Wednesday.
Because of the recent winter storms, taxpayers in Texas, Louisiana and Oklahoma were already granted a blanket extension. Their returns aren’t due until June 15, and Wednesday’s action doesn’t change that. Last year, all taxpayers had until July 15 to file returns for 2019 as the pandemic disrupted the tax-filing season.
“Thirty days is not enough time for the problems in the system to be resolved,” said Jeffrey Porter, a certified public accountant in Huntington, W.Va., adding that all taxpayers should get that same June 15 deadline that the disaster-stricken areas have. “Why not make the rest of the country consistent?”
In addition to the filing season, the new relief law gives the IRS a significant amount of work to do in the coming months. The agency has already sent out more than half the money from the latest round of stimulus checks. In addition, the IRS must set up a new system for making periodic payments of the child tax credit. And it must implement other tax changes in the new law, including expansions of the child and dependent-care tax credits.
The extra month is a great relief, said Rafael Efrat, director of a clinic at California State University, Northridge that typically prepares about 9,000 returns a year for low-income taxpayers. Given the challenges of the pandemic, the clinic had been running about 33% behind its usual pace so far.
“It’s a double-edged sword,” Mr. Efrat said, adding that the clinic had planned for its student volunteers to work only through April 15. “We may have the time, but we may not have the volunteers to do it.”