The IRS announced that it was delaying the deadline to file and pay federal income tax returns by about a month, from April 15 to May 17.
The news wasn't a total surprise: Lawmakers and consumer advocates had been calling for the IRS to give taxpayers and preparers more time, given the tax season's later-than-usual start and retroactive tax code adjustments from the American Rescue Plan that addressed the economic fallout from the pandemic.
"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," IRS Commissioner Charles Rettig said in a statement.
But there's a snag: The IRS delay only affects federal returns. States set their own filing and payment deadlines. If left unchanged, those would create a monthlong gap between the traditional April 15 Tax Day and the new May 17 federal deadline.
As expected, many states have followed the government's lead, and some have struck out on their own.
Even before last week's announcement, some states in the Midwest and the South that were hit hard by February winter storms had already pushed their tax days to the summer. (The IRS has also given them a federal filing reprieve until June 15.)
In the days immediately following the IRS change to a May 17 deadline, only California, Maine, and Pennsylvania amended their filing dates.
That tally grew in subsequent weeks as more and more states and the District of Columbia slowly changed their deadlines to match the grace period from the federal government. Iowa was the most recent state to make such a change: At the end of March, the Hawkeye State announced it will push its filing date to June 1.
As of April 5, there are only a few holdouts: Arizona, Hawaii, and New Hampshire.
Hawaii's Department of Taxation put out a statement saying it "has decided not to extend the Tax Year 2020 filing deadline. Taxpayers must file their returns by April 20, 2021."
New Hampshire also announced it would keep Tax Day as April 15 — although it's worth noting that the state only taxes investment income and not wages. "We feel any extension to the April 15, 2021, due date, even by one month, risks causing confusion and does not offer meaningful relief," according to the notice.
Arizona's deadline could yet change. A bill to extend the date to May 17 is currently making its way through the state's legislature and will be voted on in coming days.
The quickly shifting tax deadlines demonstrate a guiding principle for doing your taxes, warns Greg Kling, who teaches tax accounting at the University of Southern California: Whatever you're considering, remember that "it's not OK until they tell you it's OK."
Other tax-related deadlines have not changed. If you pay estimated taxes for your side hustle or small business, those Q1 payments are still due April 15, for example. And prior-year contributions to your IRA or HSA, which the IRS has not explicitly delayed, must still be made before April 15.
"The IRS has authority to move deadlines based on disasters. Making your IRA contribution is not a disaster-related issue," Kling explains.
"I don't think they're going to move it," he adds, "so make your IRA contribution by April 15."
Video by Courtney Stith
The delayed Tax Day will be useful for tax preparers acclimating to new regulations adopted in 2020, but Kling, like so many other tax experts, advises you aim to file your return as soon as possible in most cases.
"Practitioners are still scrambling to get all of the 2020 updates in their heads and ready to go," Kling explains, like the new, retroactive provision that excludes $10,200 in unemployment benefits from being taxed. "Some practitioners might appreciate the extra month because it gives us a chance to figure out what's going on."
The extra time also gives the sizable number of procrastinators more time to procrastinate, which Kling says is a bad idea. He gives the example of people whose income fell in 2020, making them eligible for stimulus money they didn't qualify for based on their 2019 return. Eligible taxpayers can use the Recovery Rebate Credit to claim that money.
"What if your 2020 income is lower than 2019, such that you would get a bigger economic impact payment?" Kling says. "My question is, don't you want that money sooner?"
Video by Helen Zhao
The same principle applies to tax refunds, which have been averaging $3,000 so far this season.
"The sooner you file, the sooner you'll be eligible to receive your refund," Jeffrey Levine, a CFP and CPA, and the chief planning officer at Buckingham Wealth Partners in Garden City, New York, told Grow recently. "That's money in your pocket sooner rather than later."
Getting your return in sooner rather than later may be particularly crucial this year, since the IRS is seeing unprecedented backlogs in its processing of mail and paper filings. In late January, the IRS still had a backlog of 6.7 million 1040 tax return forms to process, Politico reported. By filing early and electronically, you'll keep your records (and your refund) out of that mess.
Information in this story has been updated to reflect the most recent state data available as of April 5, 2021.
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