Apr 19, 2021
As you may know, we have supported a request to the CRA to extend the April 30 deadline to June 15. But if the deadline is NOT extended, here are some practical tips to reduce the burden of a COVID tax season.
On March 17, 2021, the U.S. Internal Revenue Service (“IRS”) issued IR-2021-59 whereby the U.S. Treasury Department and the Internal Revenue Service announced that they have automatically extended the individual federal income tax filing deadline to May 17th, 2021 from the original due date of April 15, 2021.
For individuals whose tax home is in the United States, both the tax filing and tax payment due date is normally April 15th. For those United States persons whose tax home, in a real and economic sense is outside of the United States, under Regulations their normal filing due date is June 15th.
Individual taxpayers can also defer federal tax payment for the 2020 tax year due on April 15, 2021, to May 17, 2021. The deferral of payments only applies to individual taxpayers, including taxpayers who are self-employed and subject to self- employment taxes. Taxpayers may avoid penalties and interest if all of the tax payments are made by May 17, 2021. Penalties and interest may accrue if there is an unpaid balance after May 17, 2021.
This extension of payment does not, however, apply to 2021 estimated tax payments that are due on April 15, 2021. Individual taxpayers should continue to make estimated tax payments on income which is not automatically subject to withholdings such as, self – employment income, rental income, interest and dividends.
Individual taxpayers who may need additional time to file their federal income tax returns beyond May 17, 2021 can apply for an additional extension by filing form 4868 “Application for Automatic Extension of Time to File U.S Individual Income Tax Return.” Filing this form gives taxpayers until October 15, 2021 to file their personal income tax return. It must be remembered, however, that this is an extension of the due date for filing a tax return and is not an extension of payment. As such, taxpayers must pay any federal income tax due by May 17, 2021, to avoid interest and penalties.
The federal filing extensions to May 17, 2021 only applies to individual federal income returns and tax payments due on April 15, 2021. It does not apply to state income taxes. Some states may follow the new federal extended deadline however the filing and payment deadlines varies in each state. As such you may need to reach out to your tax advisors or the state tax agencies for guidance.
Similar to prior year, the Treasury Department and the IRS extended the due date in an effort to ease the economic and administrative burden caused by the Corona Virus pandemic. IRS commissioner Chuck Rettig said in a statement “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.” The IRS will also provide additional guidance in the near future.
The IRS routinely extends the filing deadline for victims of natural disasters. In early 2021, the IRS granted victims of winter storm disasters in Louisiana, Oklahoma and Texas until June 15 to file various individual and business tax returns and to make tax payments. The extension to May 17 does not affect the June deadline.
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The material provided in this U.S. Tax Tip is believed to be accurate and reliable as of the date of posting. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither Cadesky Tax nor Cadesky U.S. Tax can accept any liability for the tax consequences that may result from acting based on the contents hereof.