The Ins and Outs of the Income Tax Deadline Extension—Which Returns, Deadlines Are Affected, and Which Aren’t?
On March 17, 2021, the IRS published IR-2021-59, postponing the deadline for filing individual income tax returns and payment of individual income taxes from April 15, 2021, to May 17, 2021. On March 29, 2021, the IRS issued Notice 2021-21, further clarifying the postponement of Federal income tax reporting and payment deadlines. The relief granted by IR-2021-59 and Notice 2021-21 does not apply to gift taxes, estimated quarterly tax payments, state or municipal taxes, or non-individual income taxes.
Tax Returns Affected
Pursuant to Notice 2021-21, the due date is postponed for all Federal income tax returns in the Form 1040 series, including all schedules, returns, and other forms filed as attachments to a return in the Form 1040 series. The forms filed as attachments include, but are not necessarily limited to:
- Schedule H (Household Employment Taxes);
- Schedule SE (Self-Employment Tax);
- Form 965-A (Individual Report of Net Section 965 Tax Liability);
- Form 3520 (Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts);
- Form 5329 (Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts);
- Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations);
- Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund);
- Form 8858 (Information Return of U.S. Persons With Respect to Foreign Disregarded Entities and Foreign Branches);
- Form 8865 (Return of U.S. Persons With Respect to Certain Foreign Partnerships);
- Form 8915-E (Qualified 2020 Disaster Retirement Plan Distributions and Repayments); and
- Form 8938 (Statement of Specified Foreign Financial Assets).
Further, any election which must be made by a taxpayer on a series Form 1040 income tax return or attachment thereto will still be considered timely if made on the same return or form filed by the postponed deadline of May 17, 2021.
Requesting Filing Extensions for Income and Gift Tax Returns in a Typical Tax Year
In any typical tax year, the due date for individual income tax returns and gift tax returns (and any tax payments due with those returns) is April 15. The due date for these returns may be automatically extended until October 15 upon request, although the April 15 due date for payments under such returns may not be automatically extended. Accordingly, any failure to make payment of taxes due by April 15 may result in interest and penalties being added.
The automatic extension for income tax returns may be requested by filing Form 4868 on or before the filing deadline. The automatic extension for gift tax returns may be requested by filing Form 8892 on or before the filing deadline.
The General Instructions for Form 4868 provide that whenever an automatic extension for a taxpayer’s income tax return is requested, an automatic extension is granted for both the taxpayer’s income tax return and the taxpayer’s gift tax return. When filing Form 8892 for an automatic extension of a taxpayer’s gift tax return only, the filer must check a box that states the taxpayer is requesting an extension of time for purposes of filing a gift tax return, but that the taxpayer is not requesting an extension for purposes of filing an income tax return. This makes sense because, in any “typical” year, if a taxpayer needs to extend an income tax return and gift tax return, only Form 4868 need be filed.
Requesting Filing Extensions for Income and Gift Tax Returns in 2021
It goes without saying that this year (as with last year) is anything but typical.
As a result of the postponement of various filing deadlines, IR-2021-59 and Notice 2021-21 provide that an automatic extension for time to file an individual’s income return until October 15, 2021, may be requested by filing Form 4868 at any time before the postponed deadline of May 17, 2021. This presents an issue with the normal order, however, as the gift tax due date is not similarly postponed. If Form 4868 is filed after April 15, 2021, but before May 17, 2021, it will effectively extend the due date for a taxpayer’s income tax return only, as it will have been submitted after the filing deadline for the taxpayer’s gift tax return. This creates a predicament for taxpayers who have not filed (or choose not to file) either Form 4868 or their income tax returns by April 15, 2021, but need to extend the filing deadline for their gift tax returns.
While the straightforward solution to this problem would seemingly be to file Form 8892 by April 15, 2021, some practitioners have expressed concern that doing so requires checking the box to request an automatic extension for a gift tax return on Form 8892 which affirmatively states that the taxpayer is not requesting an extension of time to file an income tax return. In the eyes of some practitioners, this may preclude the taxpayer from subsequently filing a Form 4868 requesting an extension of time to file an income tax return. In other words, the IRS Forms do not match up well with the extended income tax filing deadline this year.
This issue is not addressed in IR-2021-59 or Notice 2021-21 and, as of the date of this Alert, has not been addressed by the IRS. One solution discussed by some practitioners filing Form 8892 (for a taxpayer who has not already filed Form 4868 and has yet to file an income tax return) is to attach a statement clarifying that notwithstanding the language of Form 8892 the taxpayer is not waiving any right to subsequently file a Form 4868 requesting an automatic extension of time to file an income tax return.
Interest and Penalties From April 15, 2021, Until May 17, 2021, Waived
Notice 2021-21 clarifies that, for taxpayers taking advantage of the postponed deadline offered by the IRS, the period beginning on April 15, 2021, and ending on May 17, 2021, will be disregarded when calculating any interest and penalties for taxes due. May 18, 2021, will be the date on which interest and penalties for unpaid taxes begin accruing.
Deadline for Contributions to Retirement Accounts Also Extended
Notice 2021-21 also stipulates that the postponement of the deadline for filing Federal individual income tax returns also automatically extends the deadline by which a taxpayer may make contributions for 2020 to IRAs, HSAs, Archer MSAs, and Coverdell ESAs. The deadline for the payment of any 10% surtax applicable to certain distributions from IRAs, 401(k)s, 403(b)s, or other workplace retirement plans is also postponed to May 17, 2021. The due date for Form 5498 series returns was also postponed until June 30, 2021.
Deadline Extended for 2017 Unclaimed Refunds
For tax year 2017 U.S. income tax returns, the normal April 15 deadline to claim a refund has also been extended to May 17, 2021, by Notice 2021-21. Tax law provides a three-year window to claim a tax refund. If taxpayers do not file a return within three years, the money becomes property of the U.S. Treasury. The law requires taxpayers to properly address, mail and make sure the tax return is postmarked by May 17, 2021.
Gift Tax, Quarterly Estimated Tax, and State and Municipal Tax Filing and Payment Deadlines Unaffected by IR-2021-59 or Notice 2021-21
It is important to reiterate that, not only do IR-2021-59 and Notice 2021-21 fail to extend the filing or payment deadline for gift taxes, they also fail to extend the filing or payment deadlines for quarterly estimated tax payments, or any state or municipal taxes. Absent further guidance from the IRS or applicable state or municipal agency, the filing and payment deadlines for such returns or payments remain unchanged.
Non-Individual Federal Income Tax Returns Unaffected
The postponed due date for Federal income tax returns and payments provided by IR-2021-59 and Notice 2021-21 is exclusive to returns and payments due for individuals, specifically those in the Form 1040 series and the forms accompanying a Form 1040 series return. Form 1041 (Income Tax Return for Estates and Trusts), Form 1065 (Return of Partnership Income), Form 1120 (Corporation Income Tax Return), and Form 1120-S (Income Tax Return for an S Corporation), as well as any other Federal income tax or information return or payment, the due date for which was not specifically postponed by IR-2021-59 or Notice 2021-21, have not had their due dates postponed. (The original due dates for Form 1065, Form 1120 and Form 1120-S were March 15, 2021, which has already passed.)
The only non-individuals for which a due date was extended are foreign trusts and estates with Federal income tax filing or payment obligations that file Form 1040-NR, which now have until May 17, 2021, to file (and pay any tax due) as the return is a series Form 1040 return.
Contact Us For Further Information
For more information regarding IR-2021-59, Notice 2021-21, or tax filing or payment deadlines, please contact Michael Cumming (248-203-0740 or [email protected]), Robert Nelson (210-554-5266 or [email protected]), Marie Deveney (734-214-7662 or[email protected]),Rob Tiplady (734-214-7644 or [email protected]), Tony Frasca (734-214-7614 or [email protected]), Tyler Kemper (734-214-7694 or [email protected]), Nazneen Hasan (248-203-0825 or[email protected]), Victoria Remus (248-203-0553 or [email protected]), Mark Weisbard (312-627-2161 or [email protected]), Laura Callahan (312-627-2165 orl [email protected]), Kenneth Sachs (248-203-0882 or [email protected]), Amy Christen (248-203-0760 or [email protected]), Margaret Hunter (313-568-6788 or [email protected]), Scott Kocienski (248-203-0868 or [email protected]), Richard Lieberman (312-627-2250 or [email protected]), Nardeen Dalli (248-203-0793 or [email protected]), Asel Lindsey (210-554-5298 or [email protected]), or your Dykema relationship attorney.