By Akash Sehgal, Partner
The Internal Revenue Service (“IRS”) and the California Franchise Tax Board (“FTB”) announced yesterday (March 17, 2021) that the deadline for individuals to file their 2020 tax returns has been extended from April 15, 2021 to May 17, 2021. More formal guidance is expected from the IRS over the next few days, but here is what is known so far.
The deadline is only postponed for individual taxpayers and will likely be limited to those individuals that file federal Forms 1040 or a 1040 series returns or California Form 540 returns.
At this point, it does not appear that this postponement will apply to C Corporations and Trusts that have 2020 tax year endings on Dec. 31, 2020. C Corporations and Trusts will continue to have an original filing date of April 15, 2021. In addition, it is unclear at the moment whether this postponement will automatically apply to other tax forms that are generally automatically extended along with the Form 1040 such as Form 709, Form 3520, etc.
Individual taxpayers do not need to file any forms or notify the IRS or FTB to qualify for this automatic federal and California tax filing deadline extension. If individual taxpayers choose to extend their federal income tax returns past the new May 17, 2021 deadline, they will need to request an extension by filing Form 4868. This is the normal process for requesting an extension from the original due date. An extension from the May 17, 2021 date would extend an individual’s return to Oct. 15, 2021. California provides an automatic extension of time to file to October 15, 2021.
Individual taxpayers can also postpone federal and California income tax payments for the 2020 tax year that are due on April 15, 2021 to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement also applies to 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.
This relief does not apply to the first quarter 2021 estimated tax payments that are due April 15, 2021. These payments are still due on April 15. Additionally, it remains to be seen whether states other than California adopt this change in filing date. In 2020 when the IRS announced a change in the April 15 deadline for the 2019 tax year to July 15, many states also changed their deadlines to conform with the federal change, so it seems likely that most if not all states that impose a personal income tax will adopt this change for the 2020 tax year. GHJ will continue to monitor this process.
GHJ recommends speaking with your tax advisor on how these changes may affect your 2020 tax filings.