The IRS doesn’t see a need to extend the 2021 filing deadline nationally, but is still considering it, Commissioner Charles Rettig said during a congressional hearing.
At a February 23 hearing on IRS oversight held by the House Appropriations Financial Services and General Government Subcommittee, Rettig said that extending the filing season creates a lot of confusion for taxpayers and “backs up” the IRS.
Individuals can still get a filing extension to October 15, said Rettig, adding that based on his personal relationships with “several thousand accountants,” he believes the private sector is already well into the 2021 filing season and has been since mid-January.
Patrick W. Thomas of the Notre Dame Law School Tax Clinic told Tax Notes February 23 that the choice not to extend the deadline is probably the right call, although he generally supports pushing back the filing deadline in all tax years to allow the IRS enough time to effectively data-match W2s, 1099s, and other third-party information returns.
“We're in a situation very unlike the nationwide shutdowns and permeating uncertainty that existed prior to April 15 of last year,” Thomas said. “Extending the payment and filing deadlines was unquestionably the right move then.”
“Now, the Service, practitioners, return preparers, and others have innovated in devising more effective remote filing and preparation options, such that individuals with access to technology will be able to prepare their returns timely,” Thomas added.
Joel Grandon of Joel Grandon Accounting Services said that he personally believes a 30- or 45-day extension would be reasonable, but that he doesn’t want to see an extension to July 15.
The IRS announced in a February 22 release that the state of Texas and taxpayers in other states that recently received FEMA disaster declarations will automatically get filing and payment relief, with a tax return filing deadline extension of two months.
“For many taxpayers, even in affected areas, the lingering problems from the pandemic will be greater than the problems from the winter storms,” Bob Probasco of Texas A&M University School of Law told Tax Notes. “Yet there is relief for the latter but not for the former.”
The response should be based primarily on the effect on the public rather than the effect on the IRS, and that dictates an extended filing season again this year, he said.
Unemployment Fraud
Rettig also responded to concerns about an increase in unemployment benefits fraud that’s resulting in erroneous taxes assessed to victims, saying that affected taxpayers should file an accurate return showing that the funds haven’t been received.
Members of the House Ways and Means Committee sent a February 22 letter to Rettig citing reports that Americans are receiving Forms 1099-G, “Certain Government Payments,” for unemployment compensation that they never applied for or received.
“So even though there’s a [Form] 1099-G that might indicate somebody got funds, if you did not receive those funds, file an accurate return, reach out to the state, and ask for a corrected 1099-G, which will be in a zero-dollars-received capacity,” Rettig advised.
The Ways and Means letter states that these individuals appear to be victims of an identity theft scheme in which someone else received unemployment benefits using their personal information, and it asks the IRS to issue guidance for those who received a Form 1099-G for unemployment compensation that they didn’t receive.
Monthly Child Tax Credit?
The IRS would need about $397 million for the potential launch of monthly child tax credit payments, with some funds going to the design and delivery of an online portal, Rettig said.
Rettig cited several constraints to a launch — including staffing, training, and funding — adding that consistent, timely, and adequate multiyear funding would allow the agency to rise to the challenge.
Congressional Democrats’ next COVID-19 relief package is set to include an expansion of the child tax credit for 2021 that would make the credit fully refundable, increase its value from $2,000 to $3,000 for children ages 6 to 17, and require the IRS to send monthly payments rather than paying the credit as a one-time lump sum.
Further, Rep. Rosa L. DeLauro, D-Conn., introduced the American Family Act of 2021 earlier this month, which would make the proposed changes to the child tax credit permanent.