IRS extends more tax deadlines until May 17

The Internal Revenue Service responded Tuesday to calls for extending more tax deadlines by giving taxpayers until May 17 to make IRA and HSA contributions and file some refund claims.

The IRS issued the announcement as a follow-up to the news earlier this month that it is extending the April 15 tax-filing deadline until May 17. The IRS also issued Notice 2021-21, which offers more details on the other tax deadlines which have been postponed until May 17.

The IRS has faced pressure from accounting groups like the American Institute of CPAs, the National Conference of CPA Practitioners and the National Association of Enrolled Agents to push back more of the tax deadlines during the pandemic, particularly for making estimated quarterly tax payments. However, one senator suggested during a congressional hearing last week that it may be up to Congress to give the IRS the statutory authority to do that, as it did during last year’s tax season in the early days of the pandemic when Congress delayed the deadline until July 15.

Andrew Harrer/Bloomberg

In the meantime, the IRS has been trying to provide more latitude. In extending the deadline to file Form 1040 series returns to May 17, the IRS said it is automatically postponing to the same date the time for individuals to make 2020 contributions to their individual retirement arrangements (IRAs and Roth IRAs), health savings accounts (HSAs), Archer Medical Savings Accounts (Archer MSAs), and Coverdell education savings accounts (Coverdell ESAs). This postponement also automatically postpones until May 17, 2021, the time for reporting and payment of the 10 percent additional tax on amounts includible in gross income from 2020 distributions from IRAs or workplace-based retirement plans. Notice 2021-21 also postpones the due date for Form 5498 series returns related to these accounts to June 30, 2021.

For tax year 2017 federal income tax returns, the normal April 15 deadline to claim a refund has also been extended to May 17, 2021. The law provides a three-year window of opportunity to claim a refund. If taxpayers don’t file a return within three years, the money becomes property of the U.S. Treasury. The law requires taxpayers to properly address, mail and ensure the tax return is postmarked by the May 17, 2021, date.

In addition, foreign trusts and estates with federal income tax filing or payment obligations, who file Form 1040-NR, now have until May 17, 2021.

Tax preparers who want to participate in the voluntary Annual Filing Season Program (AFSP) for 2021 now have until May 17, 2021, to file an application with the IRS. The usual due date is April 15.

However, the latest IRS notice doesn’t change the April 15 deadline for making estimated tax payments. The IRS noted that taxes need to 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, such as self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have taxes withheld from their paychecks and submitted to the IRS by their employer, but others need to make estimated payments on a quarterly basis.

The AICPA and the NAEA sent a letter last week to IRS Commissioner Charles Rettig and Mark Mazur, acting assistant secretary for tax policy at the Treasury Department, asking them to extend the relief granted earlier this month to estimated tax payments. “IR-2021-59 allows individual taxpayers to postpone Federal income tax filings and income tax payments due on April 15 until May 17,” wrote AICPA Tax Executive Committee chair Christopher Hesse and NAEA executive vice president Megan Killian. “Unfortunately, the important relief provided by this announcement is narrow in scope and does not offer relief to millions of small businesses, many individual taxpayers with first quarter estimated payments, and others such as fiduciary and corporate taxpayers. In contrast, in a recent disaster declaration announcement regarding winter storms in Louisiana, the IRS granted various individual and business taxpayers broad payment and filing relief until June 15, 2021. The relief was provided to the entire state and did not attempt to arbitrarily discriminate between the different types of taxpayers or taxpayers of different economic status.”

They argued that the decision fails to recognize the millions of small businesses and the self-employed taxpayers, such as Instacart workers and Uber drivers, that have faced hardships and economic challenges due to the coronavirus pandemic and must calculate and make estimated payments.

Last week, the National Conference of CPA Practitioners also sent a letter asking for a delay in quarterly estimated tax payments (see story). “Estimated tax payments are not made by just the wealthy,” said NCCPAP. “Any individual who is a small business owner is most likely going to have to make estimated tax payments during the year to cover their potential tax liability. Not all business owners are wealthy. Most actually fall into the lower- and middle-classes. … By failing to include estimated tax payments, fiduciary tax returns, and corporate tax returns in the extension to May 17, the IRS fails to recognize the real-world stresses of the past year that have been imposed on taxpayers, small businesses, and tax practitioners.”

During a Senate Finance Committee hearing last week on international tax policy, Sen. Maria Cantwell, D-Washington, suggested that it may be up to Congress to extend the date for estimated tax payments. “We still have the requirement that people have to pay their first quarterly taxes before that [May 17 date],” she said. “I think this is something that is causing a great deal of consternation at home, particularly as it relates to other provisions in the CARES Acts that we’ve passed. I hope that we can look at legislation that would actually move that requirement to coincide with the May [17] date.”

“I know that the Treasury is committed to ensure that the tax deadlines are suited to the needs of the American people,” responded Kimberly Clausing, deputy assistant secretary for tax analysis at the Treasury Department. “The extension of the original tax deadline was meant to help taxpayers have more time in this difficult time to file their taxes, and we’re considering to focus on implementation issues there.”

“I think the issue is that we legislatively have to pass that date, so we should get on that, Mr. Chairman and ranking member, and actually figure out how to do that sometime when we return in the beginning of April, and we should just do that,” said Cantwell. “We’ll continue that drumbeat.”