A growing list of state revenue agencies hustled to extend their individual tax filing and payment deadlines a day after the Treasury Department and Internal Revenue Service gave individual taxpayers an additional month to submit their 2020 returns.
Revenue departments in Alabama, Colorado, Illinois, Kansas, Kentucky, Maine, Missouri, Montana, New Mexico, Pennsylvania, South Carolina, West Virginia, and Wisconsin announced Thursday they would match the new federal date, May 17, instead of April 15. Revenue officials in Arizona, North Dakota, and Iowa told Bloomberg Tax they were studying the issue and expected to make decisions shortly.
Legislative leaders in Massachusetts said they were committed to approving the May 17 date. California, Utah, Oregon, and Maryland previously announced plans to extend their deadlines.
Tax practitioners and administrators expect more states to follow.
“Clearly there will be pressure to do so because individuals can’t file their returns for state purposes unless they have the federal number to start the computation,” said Sarah McGahan, managing director for state and local tax at KPMG LLP.
McGahan predicted most states would eventually comply with the May 17 deadline. Otherwise, she said, “you’d be in this bizarre situation where your state return would be due before the federal, and that is an impossibility.”
John Valentine, president of the Federation of Tax Administrators and chair of the Utah Tax Commission, agreed and added that adoption of the new deadline is almost guaranteed in the two dozen “rolling conformity” states, which automatically conform to federal tax changes as they are enacted.
“If you have a May 17 federal filing date and you’re dependent on the adjusted gross income calculation on the federal return, it’s almost impossible to file the state return before the federal return,” he said.
The IRS’s filing and payment extension responded in part to calls from a growing number of lawmakers and from trade groups, notably the American Institute of CPAs, who all cited confusion and complexity because of pandemic relief measures and related tax changes.
The issue is getting tricky in some states including New York, where Gov. Andrew Cuomo (D) is facing a political crisis and the state’s Legislature is taking steps to seize powers from the executive branch. State legislators hope to intervene with respect to the filing deadline, and are already crafting a bill in order to quickly be able to provide relief to residents.
“They feel it should be extended and they feel that it is something that should be done probably regardless of the interpretation one might make of the governor’s powers,” said Democrat Assembly Member Phil Steck.
New Jersey’s treasurer previously signaled the Garden State would work with the Legislature to determine how best to proceed with a tax filing extension. The state has yet to officially announce any changes.
“We expect to make an announcement soon,” said Jennifer Sciortino, a spokeswoman for the New Jersey Treasury Department.
Ahead of the IRS change, Maryland Comptroller Peter Franchot last week provided state residents an additional three months, extending the deadline to July 15.
Despite the rush to conform, a one-month extension won’t be easy. The new date is expected to trigger major programming and return processing challenges for the states in the middle of tax filing season.
“One of the core functions of a tax program is a date. So you can’t just go in and change that date and expect the program to work,” Valentine said. “That’s a hard process when you have to process 1.3 million returns.”
Jamie Yesnowitz, a state and local tax expert for Grant Thornton’s Washington National Tax Office, agreed.
“Making federal changes in March that affect the prior tax year puts states in an especially difficult bind,” he said.