IRS Announces Extended Filing Deadline
The Internal Revenue Service announced that the April 15, 2021 tax filing deadline has been extended until May 17, 2021 for Form 1040 filings. This delay of the filing deadline only applies to Form 1040 filings. Corporations, trusts, and first quarter estimated tax payments for individuals remain due at April 15, 2021.
This announcement, which provides much needed relief for CPAs, comes after the IRS received heavy pressure from Congress and tax and accounting groups. Mississippi has also announced that they will follow federal guidelines and allow taxpayers until May 17, 2021 to file.
Due to Covid-19’s effects, the IRS has fallen behind on processing returns and letters from taxpayers. They are also in the process of sending out third round stimulus payments and updating tax forms due to the recent changes to the taxability of unemployment benefits. In short, the extension is much needed.
Unemployment Tax Breaks in the Recent Covid-19 Relief Bill
The recent $1.9 trillion Covid-19 relief bill signed by President Biden provides a tax break on unemployment benefits received in 2020. Each person is able to exclude $10,200 in aid from federal tax. However, not everyone qualifies for the tax cut: only individuals who earned less than $150,000 in 2020 are eligible. The $150,000 ceiling is the same for all taxpayers, regardless of filing status.
Many taxpayers have already filed their 2020 returns, and the IRS is planning to release guidance on this new change for those taxpayers. At this time, the IRS is recommending not to amend tax returns until further guidance is released. Mississippi does not currently provide this same exclusion, but we are continuing to monitor updates as they are released.
Third-Round Stimulus Payments
The Covid relief bill also provides a $1,400 stimulus payment to eligible individuals including eligible dependents. Unlike the first two rounds of stimulus, eligible dependents for the third stimulus include dependents 17 years and older as well as elderly relatives. For example, a family of four with two children in college would receive $5,600.
The third round of stimulus payments does have a phaseout range based on adjusted gross income. For the third round of payments, eligible individuals with an adjusted gross income of $75,000 or less are entitled to the full $1,400. The ceiling is $112,500 for individuals filing as head of household and $150,000 for couples filing jointly. However, taxpayers will not receive a third payment if their adjusted gross income exceeds $80,000 if filing single or as married people filing separately, $120,000 if filing as head of household, or $160,000 if married and filing a joint return or as a qualifying widow or widower. If you have not filed your 2020 tax return, the IRS will use your 2019 return to determine eligibility.
The one-month extension until May 17th provides us more time for timely filed tax returns but we are continuing to serve our clients as if everything remained the same. We have many returns in process and we are committed to providing excellent client service and turnaround time for our clients. If you have other questions, don’t hesitate to reach out to us.