IRS Declines to Extend Due Date for First-Quarter Estimated Tax Payments
March 30, 2021
At a glance:
- The IRS has confirmed its extension of the filing due date for 2020 individual income tax returns to May 17, 2021.
- This extension also applies to the due date for making 2020 contributions to an individual IRA, Roth IRA, health savings account (HSA), Archer medical savings account (MSA) and Coverdell education savings account (ESA).
- The IRS confirmed that this extension does not apply to the due date for making 2021 estimated tax payments for the 2021 year, which are still due on April 15.
- Our original plan was to include the first quarterly estimated tax payment on May 17 and remit it with any 2020 extension payment due.
- However, given the IRS’s March 29 guidance that interest and penalties on late payments of first-quarter estimated tax will still apply if not made by the original due date, we are revising our plan to ensure all first-quarter estimated payments are calculated and ready to remit by April 15.
- Aprio is committed to staying on top of all developments impacting your tax and business matters. We recommend you consult with your Aprio professional to ensure your tax returns are filed in a timely manner.
The full story:
On March 17, the IRS issued IR-2021-59, which officially extends the due date for filing and payment of individual 2020 income tax returns to May 17, 2021. However, the guidance expressly states this extension does NOT apply to 2021 first-quarter estimated tax payments, which are still due on April 15, 2021, as of the date of the IRS’s announcement.
We wish to reiterate that while the extension provides relief for many taxpayers, if you are used to filing your returns by April 15, you should consider staying on that timeline. This is especially true if you’re expecting a refund or if your 2020 tax return information would maximize your economic stimulus benefit.
1. The extension only applies to 2020 individual income tax returns
This extension applies to both the filing of Form 1040 returns and payment of any 2020 income tax obligations. However, the IRS did not grant similar filing relief to any corporation, trust or individual required to file a gift tax return with an April 15 due date. Those returns are still due on the original date.
2. The extension does not apply to 2021 estimated tax payments due by April 15, 2021
If you are required to make estimated payments, the first-quarter installment is still due by April 15. The IRS restated this as their position in the Notice 2021-21 issued on March 29. While we are accustomed to having our clients combine their first-quarter estimated payment with their extension payment for the prior year tax and carrying forward overpayments to the next year’s tax, we believe it is prudent for our clients to proceed and be prepared to make first-quarter payments on April 15, rather than waiting until May 17.
The bottom line
The extension of the individual filing due date provides relief to a significant number of taxpayers, as well as to the IRS. However, if you can file your returns by the original due date, we recommend you do so, especially if that filing will generate a refund or provide a benefit to your stimulus calculation. Our team will work with you to file your return or extensions as soon as possible.
Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding this matter.
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About the Author
Cardell is a partner in the Transaction Advisory Services group at Aprio. Cardell has over 15 years of tax consulting experience serving clients across a wide range of industries, including construction, distribution, financial services, manufacturing and telecommunications. Cardell focuses on advising financial and strategic clients on the tax aspects and structuring of taxable and tax-free transactions. These include mergers and acquisitions, dispositions, restructurings, leveraged buy-outs and recapitalizations.