2021 Tax Extension – How Does the Extension Affect You?

Apr 1, 2021

Pursuant to IRS Notice 2021-21, the Treasury Department and Internal Revenue Service have announced that Tax Day with respect to individual tax return filings has been extended to May 17, 2021. This extension applies to individual filers, and 2020 tax payments will not incur additional penalties or interest until May 17th. This extension is automatic and applies not only to filing an individual tax return, but also applies to tax payments. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances beginning on May 18, 2021. This postponement only applies to individual federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2021, and does not apply to state tax payments, deposits, or payments of any other type of federal tax. This extension provides taxpayers with additional time to contribute to an Individual Retirement Account (IRA), and thereby decrease their adjusted gross income to potentially receive more favorable tax benefits. This extension does not apply to 401(k) retirement savings accounts. Also, many states may not allow for a similar extension.

Individual taxpayers who need additional time to file beyond the May 17th deadline can file an extension by May 17th in order to obtain an extension of time to file the actual individual tax return by October 15th by filing Form 4868 by May 17th, but note that this does not grant an extension of time to pay taxes due. If you mail in your individual tax return, it must be postmarked no later than May 17th.

As of now, income tax payments related to the 2021 tax year are excluded from the federal extension. Therefore, individuals that are required to pay federal estimated quarterly tax payments are required to make their first quarter payment by April 15, 2021. This not only affects self-employed individuals, but also owners of flow-through entities and S corporation shareholders.

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2021 Tax Extension – How Does the Extension Affect You?

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