Recent talk from the Trump administration about potentially extending the upcoming July 15 tax season deadlines is bringing out a wider range of viewpoints and less agreement than before the first delay was announced.
IRS and Treasury in March pushed back the April deadlines for filing and paying 2019 taxes to July 15 to accommodate taxpayers during the Covid-19 pandemic. The administration originally sought to delay just the deadline for individuals and businesses to pay their taxes, but ultimately moved the filing date as well after pressure from outside groups, including those representing tax professionals, and lawmakers.
Shifting deadlines again could further complicate a tax filing season that’s likely already been confusing for many filers and their advisers.
“I don’t see any reason to extend further a filing season that is already more than twice its usual length,” said Robert Kerr, executive vice president of the National Association of Enrolled Agents.
“It won’t help IRS catch up with its backlog, it won’t bring the procrastinators into the fold, it won’t allow for alignment with state requirements,” he said. “It would, however, be confusing and a messaging nightmare.”
The IRS deferred any questions on the extension to the Treasury Department. Treasury didn’t respond to requests for comment.
Among the biggest issues, tax professionals say, is state conformity—especially since fewer states are likely to follow the federal government’s lead a second time. More delays could exacerbate existing budget challenges and revenue shortfalls.
Some states didn’t entirely align their due dates with the July 15 deadline.
Virginia, for example, said all taxpayers would get an automatic six-month filing extension if they couldn’t meet the state’s original May 1 deadline. But individuals only got one extra month to pay the taxes they owed without interest or penalties.
A lack of state conformity can create a number of problems.
For starters, in many states the federal return acts as the starting point for the state return, so it must be filed, or at least prepared, first; that would mean delaying the federal deadline again would have little effect unless the state also moves its due date, said Edward Karl, vice president of taxation of the American Institute of CPAs.
Having different deadlines at the federal and state levels can also create confusion that leads to taxpayers filing state returns late, opening themselves up to penalties and interest, he said.
Payment vs. Filing
Some groups are advocating that IRS and Treasury just push back the tax payment deadline, similar to what the government originally sought to do with its first extension.
Americans for Tax Reform, a conservative advocacy group, said Wednesday that deferring the payment due date through the end of this year would provide more liquidity for individuals and businesses, but moving the filing deadline again would just result in people procrastinating, even though they might be owed a refund.
Douglas Holtz-Eakin, president of the conservative American Action Forum, has taken a similar stance.
Several groups signed a June 18 letter advocating for shifting payment deadlines back further.
Extending the payment deadline could help people who may not have the money to pay their taxes right now because they’ve lost income or jobs as a result of Covid-19—a problem that AICPA members have raised on behalf of their clients, according to Karl.
More than a third of taxpayers surveyed in May by audit defense company TaxAudit said they didn’t have the resources to pay 2019 taxes owed.
It would also make it easier for taxpayers to file extensions, Karl said. Normally a person has to estimate and pay any owed taxes by the normal filing deadline when they seek an extension, he said.
AICPA was one of the groups that called on Treasury and the IRS to delay both the tax payment and filing deadlines before the first extension. A filing extension was necessary at that time because practitioners and their clients weren’t yet used to operating under the new normal, Karl said.
Now the association is hearing that “CPAs and their clients have learned to adapt to the changed environment,” he said.
Some groups are nonetheless asking for both deadlines to be extended again.
The National Treasury Employees Union, which represents IRS workers, worries that the looming July 15 deadline is putting pressure on the agency to bring back workers, potentially prematurely.
“IRS employees shouldn’t have to risk their lives to come to work,” the union’s national president Tony Reardon said earlier this month in a statement calling for an extension of the tax filing season to Oct. 15.
The National Taxpayers Union Foundation, which signed the coalition letter on extending tax payment deadlines, has previously supported extending the filing due date, too.
“By delaying tax payments and tax filing obligations, businesses and individuals are able to retain cash during the crisis when they need it the most, and it relieves an administrative burden, removing the need to hunt down tax receipts during a pandemic,” the group said in April.
The group, however, is currently prioritizing delaying the payment due date, Pete Sepp, president of the NTUF, told Bloomberg Tax Friday.