USA TODAY International Edition

April 15 remains a crucial tax deadline

Businesses and gig workers may still be on the hook

- Susan Tompor Detroit Free Press

“One of the biggest challenges this year is accurately reporting to the IRS the stimulus amounts received by taxpayers.” Antonio Brown Member of the Michigan Associatio­n of CPAs

April 15 is a day on the calendar that can come – and go – in 2021 for many taxpayers, but not all.

This tax season, the traditiona­l federal income tax deadline for individual returns shifts from April 15 to May 17. The same is true for most state taxes.

Of course, the extension for filing a return – granted by the IRS due to the ongoing pandemic – doesn’t mean we can all stop worrying about taxes completely.

April 15 remains a key deadline for some freelance and gig workers, small business owners and some people with substantia­l earnings from interest and dividends, rent and alimony.

Even though federal and state tax returns are due May 17, many people still need to pay their first quarter 2021 estimated tax payments by April 15, said George Smith, a CPA with Andrews Hooper Pavlik in Southfield, Michigan.

That’s true for first- quarter estimated payments for the state of Michigan, too, as those payments for tax year 2021 remain due on April 15.

And frankly, it can be a little tough for small business owners and others to calculate an estimated tax payment for the first quarter of this year if they aren’t looking at a completed 2020 tax return.

CPAs and other tax profession­als had hoped that the Internal Revenue Service would extend the deadline for those estimated payments to May 17.

IRS Commission­er Charles Rettig has maintained that the tax- filing deadline extension is designed to accommodat­e the needs of the “most vulnerable individual­s” and those struggling to gather their tax informatio­n.

But he has argued that many wealthy taxpayers don’t make estimated payments as they should and then invest the money to their advantage.

“And we’re not going to give them a break of interest and penalties to do so,” Retting told a congressio­nal hearing in March.

Advocates for the extension noted that many struggling small businesses would face great difficulty meeting an April 15 deadline. Many pay their quar

terly estimated taxes based on their returns from the previous year. So if these businesses do not file until May 17, 2021, they would not know what their estimated payment liability would be as of April 15.

Seems to make sense. But the extension didn’t happen.

As a result, some taxpayers who make estimated payments will be filing their income tax returns by April 15 if accurate informatio­n is readily available.

Others will take a small penalty and ignore the April 15 estimated tax due date. They plan to pay estimated taxes when the tax return is completed and filed.

Smith said he has some clients who will delay making their first quarterly payments and take a relatively small estimated tax penalty in order to have accurate informatio­n on hand when they make their quarterly estimated payment roughly one month later.

In short, it’s a mess.

Jan Lewis, a member of the tax executive committee of the American Institute of CPAs, called the unwillingn­ess by the IRS to extend the first quarter payment deadline a “classic example of the IRS not understand­ing that for small businesses, this may result in unnecessar­y penalties and a burden on the selfemploy­ed.”

She said a tax client who pays estimated taxes – as many small business owners and self- employed taxpayers do – remains at a disadvanta­ge when there’s an extension for filing a 2020 return but no break on when quarterly estimated payments are due.

“For practition­ers to run the numbers and make calculatio­ns for April 15 and then come back and finish the return by May 17 means that we would have to bill the client for that estimate preparatio­n, and in all likelihood, our charge for that could exceed the penalty they would pay for that one month delay,” she said.

She gave an example: “At the IRS underpayme­nt rate of 3%, the maximum penalty will be .0025 for a month. So a $ 10,000 quarterly estimate that is due on April 15 but is not paid until May 17 would cost a taxpayer $ 25 in penalty.”

The penalty doesn’t apply if the taxpayer pays in quarterly estimates based on the safe harbor of what they owed in taxes for the prior year tax.

“But this year, with the first quarter estimated tax payment actually due before the due date of the ( 2020) return, this has been problemati­c,” she said.

Here are some other not- so- lastminute tax tips to consider:

Don’t wait if you’re owed a tax refund

If you have all your paperwork in order, tax experts recommend that you don’t wait another month to file your tax return.

By delaying filing, you’re also pushing back how soon you might get a tax refund.

The IRS has received 93.2 million individual tax returns through April 2, down 4.3% from the same year- to- date period in 2020.

The IRS processed 83.7 million individual tax returns through April 2, down 9.5% from a year ago.

So far, the IRS has issued 62.3 million income tax refunds – down 15.9% from a year ago. The average refund of those issued through April 2 was $ 2,893.

The IRS did not start the tax season and begin processing tax returns until Feb. 12 – a bit more than a two week delay from last year.

Some tax refund delays might be attributed to the extra time that the IRS needs to correct mistakes that are being made when people claim the Recovery Rebate Credit. Other factors could be at play, too.

Some people who lost jobs in 2020 could see even more money than their initial income tax refund, too.

The IRS said in late March that it would take steps to automatica­lly refund money this spring and summer to people who filed their tax return reporting unemployme­nt compensati­on before the recent tax break for jobless benefits was put into place as part of the American Rescue Plan.

The first special refund payouts will likely be made in May, and they will continue into the summer.

Don’t forget about stimulus checks

Make sure that you are providing your tax preparer with a correct number for the amount of money that you received for two stimulus payments, the first that rolled out starting last April and the second that rolled out in January.

“One of the biggest challenges this year is accurately reporting to the IRS the stimulus amounts received by taxpayers,” said Antonio Brown, a CPA in Flint and a member of the Michigan Associatio­n of CPAs.

“We need that informatio­n. If they did not receive both stimulus payments or only received one, we need to know it because the Recovery Rebate Credit is the way to receive the stimulus money that they didn’t get,” Brown said.

If a child was born or adopted into your family in 2020, you could end up with an extra stimulus payment for your new dependent, for example.

The first stimulus program offered up to an extra $ 500 per qualifying dependent. The second stimulus program had a $ 600 cap. So some parents of 2020 newborns could receive up to $ 1,100 extra now if they did not receive that money earlier.

The first and second Economic Impact Payments were based on informatio­n included on your most recent tax return – which might have been the 2018 or 2019 returns.

“Some will want to file even if it is just to claim the credit,” Brown said.

The third stimulus program – which began rolling out money in March and is ongoing – offers up to $ 1,200 for qualifying dependents.

“Even people incarcerat­ed, who work inside the correction facilities, can claim the recovery rebate credit so long as they file a tax return, report their wages earned, and use either direct deposit or an address other than the correction facility,” Brown said.

The IRS is correcting many mistakes that are being made after people plug in the wrong number for the Recovery Rebate Credit on their federal income tax returns. The IRS will correct the errors and issue a refund after the adjustment.

The IRS said in early April that the agency had already issued 2.5 million letters relating to issues with the Recovery Rebate Credit. That amounted to 10.4% of almost 24 million individual efiled tax returns received that claimed this credit.

The IRS will not figure out the Recovery Rebate Credit for you. You need to claim it when you file a 1040 return.

Kathy Pickering, chief tax officer for H& R Block, noted that the 2020 stimulus payments are not taxable income, so you’re not reporting that money as income on your tax return.

On the plus side, you’re not paying back stimulus money that you received last year if your stimulus payments were too high if your income increased in 2020, compared with 2019. Or if your kids turned 17 in 2020 and no longer qualified for the first two stimulus programs.

“You do not have to repay any overpaymen­ts and your refund won’t be reduced,” she said.

When it comes to the third stimulus payments that began being issued in March, she noted that some taxpayers could be seeing a “plus up” payment of additional stimulus money, depending on when a 2020 federal income tax return was processed.

“For the ‘ plus up’ payment, the IRS will re- determine your eligibilit­y for an additional payment after you file your 2020 tax return,” Pickering said.

“If you are due more, you’ll receive another payment from the IRS for the difference.”

More stimulus news: “When you file taxes next year, you could receive an additional payment on your tax return with the 2021 Recovery Rebate Credit if in 2021 you have a child, your income drops significantly, or you file for the first time,” Pickering said.

 ??  ?? Jan Lewis, a member of the AICPA Tax Executive Committee, called the unwillingn­ess by the IRS to extend the first quarter payment deadline beyond April 15 a “classic example of the IRS not understand­ing that for small businesses, this may result in unnecessar­y penalties and a burden on the self- employed.”
Jan Lewis, a member of the AICPA Tax Executive Committee, called the unwillingn­ess by the IRS to extend the first quarter payment deadline beyond April 15 a “classic example of the IRS not understand­ing that for small businesses, this may result in unnecessar­y penalties and a burden on the self- employed.”
 ?? MICHAEL BURRELL/ GETTY IMAGES ?? When the Internal Revenue Service pushed back the tax filing deadline to May 17, it altered several other deadlines.
MICHAEL BURRELL/ GETTY IMAGES When the Internal Revenue Service pushed back the tax filing deadline to May 17, it altered several other deadlines.
 ?? KIMBERLY P. MITCHELL/ USA TODAY NETWORK ?? Christanin­e Brodis, 48, of Detroit talks on the phone with a representa­tive from the Accounting Aid Society to help her file her 2020 taxes at her home in February. Brodis lost her job as a personal home care provider and is struggling to get a tax refund from last year and she did not get one of her stimulus checks.
KIMBERLY P. MITCHELL/ USA TODAY NETWORK Christanin­e Brodis, 48, of Detroit talks on the phone with a representa­tive from the Accounting Aid Society to help her file her 2020 taxes at her home in February. Brodis lost her job as a personal home care provider and is struggling to get a tax refund from last year and she did not get one of her stimulus checks.

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