IRS extends additional tax deadlines for individuals to May 17

The IRS has issued a Notice that extends, from April 15 to May 17, additional tax deadlines for individuals. Among other things, the Notice extends the time for filing Federal income tax refund claims due on April 15, 2021, and making IRA and HSA contributions. The Notice also provides that foreign trusts and estates that file Form 1040-NR, now have until May 17, 2021 to file their returns and pay any tax due.

Background. On March 17, 2021, the IRS extended, from April 15, 2021 to May 17, 2021, the federal income tax filing and payment deadline for individuals for the 2020 tax year. See IRS extends filing deadline to May 17 (03/18/2021).

More deadlines extended. The IRS has now extended to May 17, 2021 deadlines for the following:

IRAs and Roth IRAs. Making contributions to IRAs and Roth IRAs, the time for reporting and paying the 10% additional tax on 2020 distributions from IRAs or workplace-based retirement plans. Note though that the deadline for filing Form 5498 (IRA Contribution Information) series returns related to these accounts is extended to June 30, 2021.

Health and education accounts. Making contributions to health savings accounts (HSAs), Archer Medical Savings Accounts (Archer MSAs) and Coverdell education savings accounts.

2017 Refunds. Making refund claims for the 2017 tax year, which are normally due April 15. Taxpayers must properly address, mail, and ensure the refund claim (e.g., return) is postmarked on or before May 17, 2021.

Form 1040-NR. Returns of foreign trusts and estates with federal income tax filing or payment obligations that file Form 1040-NR.

Annual Filing Season Program. Applying to the Annual Filing Season Program (AFSP) for calendar year 2021. Tax preparers now have until May 17 to submit an application to participate in the AFSP.

Deadlines NOT extended. The IRS has not extended the April 15, 2021 estimated tax payment due date. These payments are still due on April 15.

Ohio Tax Deadline Extended

Ohio Tax Commissioner Jeff McClain today announced that Ohio will be following the federal government and IRS in extending the deadline to file and pay Ohio individual income and school district income taxes for tax year 2020.

The new deadline is May 17, an extension of approximately one month from the original deadline of April 15.

Commissioner McClain said the extension is intended to provide some relief to individuals impacted by the public safety measures adopted to contain the spread of the coronavirus.

As with the IRS extension, Ohio will be waiving penalty on tax due payments made during the extension. Also, as part of legislation passed addressing the continuing emergency, there will be no interest charges on payments made during the extension.

The filing extension, and waiver of penalty and interest, will be available to those filing Ohio individual income tax, and the school district income tax for tax year 2020.

(Please note that the first quarter estimated income tax payment for tax year 2021 is not impacted by this extension and must still be made by April 15.)

Tax Day for individuals extended to May 17

IR-2021-59, March 17, 2021

WASHINGTON — The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance 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,” said IRS Commissioner Chuck Rettig. “Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds, and it can help some taxpayers more quickly receive any remaining stimulus payments they may be entitled to.”

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.

Individual taxpayers do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until Oct. 15 by filing Form 4868 through their tax professional, tax software or using the Free File link on Filing Form 4868 gives taxpayers until October 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due. Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.

The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds associated with e-filed returns are issued within 21 days.

This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15. Taxes must 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, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.

State tax returns

The federal tax filing deadline postponement to May 17, 2021, only applies to individual federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2021, not state tax payments or deposits or payments of any other type of federal tax. Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details.

ARPA modifications to the employee retention tax credit in 2021

We thought you might be interested in the modification and extension of the employee retention tax credit (ERTC) by the American Rescue Plan Act (ARPA), signed by President Biden on March 11, 2021. We would be happy to assist you in analyzing whether claiming the modified and extended ERTC might benefit your business.

Background. Congress originally enacted the ERTC in the Coronavirus Aid, Relief and Economic Security (CARES) Act in March of 2020 to encourage employers to hire and retain employees during the pandemic. At that time, the ERTC applied to wages paid after March 12, 2020 and before January 1, 2021. However, Congress later modified and extended the ERTC to apply to wages paid before July 1, 2021.

ARPA extension. ARPA extended and modified the ERTC to apply to wages paid after June 30, 2021 and before January 1, 2022. Thus, an eligible employer can claim the refundable ERTC against ‘‘applicable employment taxes’’ (as defined below) equal to 70% of the qualified wages it pays to employees in the third and fourth quarters of 2021.

Except as discussed below, qualified wages are generally limited to $10,000 per employee per calendar quarter in 2021. Thus, the maximum ERTC amount available is generally $7,000 per employee per calendar quarter or $28,000 per employee in 2021.

For purposes of the ERTC, a qualified employer is eligible for the ERTC if it experiences a significant decline in gross receipts or a full or partial suspension of business due to a governmental order. Employers with up to 500 full-time employees (i.e., small employers) can claim the credit without regard to whether the employees for whom the credit is claimed actually perform services. But, except as discussed below, employers with more than 500 full-time employees (i.e, large employers) can only claim the ERTC with respect to employees that do not perform services.

Employers who got a Payroll Protection Program (PPP) loan in 2020 can still claim the ERTC. But, the same wages cannot be used both for seeking PPP loan forgiveness or satisfying conditions of other COVID-relief programs (such as the restaurant revitalization grants enacted as part of the ARPA) and in calculating the ERTC.

ARPA modifications. Beginning in the third quarter of 2021, the following modifications apply will apply to the ERTC:

• Applicable employment taxes are the employer’s share of Medicare (also called hospitalization insurance or HI) taxes (equal to 1.45% of the wages) and the amount of the tax under the Railroad Retirement Tax Act payroll tax that is attributable to the employer’s HI tax rate. For the first and second quarters of 2021, ‘‘applicable employment taxes’’ were defined as the employer’s share of Social Security tax (equal to 6.2% of the wages) and the amount of the tax under the Railroad Retirement Tax Act payroll tax that was attributable to the employer’s Social Security tax rate.

• Recovery startup businesses are qualified employers. A recovery startup business is generally a business that began operating after February 15, 2020, and that meets certain gross receipts requirements. A recovery startup business will be eligible for an increased maximum credit of $50,000 per quarter, even if the business has not experienced a significant decline in gross receipts or been subject to a full or partial suspension under a government order.

• A ‘‘severely financially distressed’’ employer who has suffered a decline in quarterly gross receipts of 90% or more compared to the same calendar quarter in 2019 will be able to treat all wages (up to the $10,000 limitation) paid during those quarters as qualified wages. This rule will allow a large employer (i.e., an employer with over 500 employees) under severe financial distress to treat those wages as qualified wages whether or not its employees actually provide services.

• The statute of limitations for assessments relating to the ERTC will not expire until five years after the date that the original return claiming the credit is filed or treated as filed. For example, if the Form 941 for the fourth quarter of 2021 claiming the ERTC is treated as filed on April 15, 2022, the return could be audited with respect to the ERTC as late as April 14, 2027.

If you have any questions relating to how the extension or modifications will affect your business’s claiming the ERTC, please let us know.

IRS Commissioner again says tax season won’t be extended

At a March 3rd virtual tax conference hosted by the Federal Bar Association, IRS Commissioner Charles Rettig again said that IRS has no plans to extend the tax return filing deadline beyond April 15, 2021.

In February 23 testimony before the House Appropriations Committee Financial Services Subcommittee, Commissioner Rettig had said that IRS was not planning to extend the April 15 filing deadline despite requests from several House Democrats. At that time, he also noted that a final decision on the matter hasn’t yet been reached

President agrees to faster phaseout of $1,400 stimulus checks

President Joseph Biden has agreed to a compromise with moderate Senate Democrats to narrow the income eligibility for the next round of $1,400 stimulus checks by creating a faster phaseout based on adjusted gross income (AGI).

The American Rescue Plan Act of 2021 (Act), as passed on February 27 by the House of Representatives, contains a provision to provide a $1,400 stimulus payment. The amount of the payment phases out ratably for single filers with AGI over $75,000 ($112,750 for heads of households; $150,000 for joint filers). The payment phases out fully for single taxpayers with $100,000 of AGI ($150,000 for heads of household; $200,000 for joint filers). AGI, for this purpose is 2020 AGI, or 2019 AGI for taxpayers who have not already filed their 2020 return. (Act Sec. 9601)

President Biden has agreed to reduce the abovementioned $100,000, $150,000 and $200,000 full phaseout amounts to $80,000, $120,000, and $160,000, respectively.

Under the new agreement, the same households who would have received the full payment of $1,400 per person under the House bill will continue to receive the full payment. For example, individuals earning less than $75,000 and couples earning less than $150,000 will receive the full payment—just as in the House bill.