What happens if you file an extension for the tax deadline in 2021? Are there penalties?

The federal government and a majority of states have extended their tax filing deadline to 17 May. The covid-19 pandemic and subsequent economic crisis have created a more complicated tax situation for many people in the US. Additionally, the American Rescue plan and other bills passed at the state level established new tax credits and benefits that the IRS and other tax authorities needed time to adjust their systems to accommodate. For example, in California, an economic recovery bill passed in February made low-income residents eligible for a $600 stimulus check. To claim the benefit, a 2020 tax return must be submitted.

Getting an extension from the IRS

Applying for a filing extension is easy. According to the IRS “Individual taxpayers do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief.” The only action that must be taken to get granted an extension, which lasts until 15 October, is to submit “Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov.”

Are there penalties if an extension is requested?

Filers should be aware that this extension does not apply to pay taxes due and the tax authority advises that “taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.”

Requesting a state extension

If your state has extended the tax filing deadline, a request for an extension may need to be submitted to the state tax authority.

Which states have extended the filing deadline to 17 May?

Arkansas, California*, Connecticut*, Colorado*, District of Columbia*, Delaware*, Georgia*, Illinois*, Idaho, Indiana*, Kansas*, Kentucky*, Massachusetts*, Maine*, Michigan*, Minnesota*, Mississippi, Missouri*, Montana*, Nebraska*, North Carolina*, North Dakota, New Jersey*, New Mexico, New York*, Ohio*, Oregon, Pennsylvania*, Rhode Island*, South Carolina*, Tennessee*, Utah*, Vermont, Virginia**, West Virginia*, Wisconsin*

*The extension does not apply to estimated tax payments due 15 April, 2021.

**The first quarter estimated tax payment is still due 3 May, 2021

Deadline Extended Beyond 17 May

Due to severe winter storms and other disruptions, Iowa (1 June 2021), Louisiana (15 June 2021), Maryland (15 July 2021), Oklahoma (15 June 2021) have all extended their filing deadline beyond 17 May.