Tax Extensions - What They Mean for You

With guidance from the IRS still trickling in, some tax preparers are less than impressed. “I’m ok with the extended due date; the issue I have is with the mail that the IRS hasn’t opened from LAST YEAR!” says Alan C. Barber, CPA, MTx. “Maybe the extra time will help them catch up, but I am an eternal optimist!”

Federal Dates and News

A quick glance at the IRS page listing news releases for the current month shows two substantive updates in the final days of March alone.

First, additional deadlines have been extended to May 17, 2021. Please note that at this time the deadline for estimated tax payments has not been extended.

• 2020 contributions to individual retirement arrangements, health savings accounts, Archer Medical Savings Accounts, and Coverdell education savings accounts
• Reporting and payment of the 10% additional tax on amounts includible in gross income from 2020 distributions from IRAs or workplace-based retirement plans (due date for Form 5498 series returns related to these accounts has been delayed to June 30, 2021)
• Unclaimed refunds for 2017
• Tax preparer applications to the Annual Filing Season Program (AFSP)

Second, the IRS will take steps to automatically refund money to people who filed their tax returns with unemployment compensation prior to the recent changes excluding certain 2020 unemployment benefits (taxpayers who earned less than $150,000 in modified adjusted gross income to exclude unemployment compensation up to $20,400 if married filing jointly and $10,200 for all other eligible taxpayers).

State Dates and News

Following the announcement of the federal extension, many states responded with their own tax deadline extensions. Two days ago, AICPA provided a list of state filing dates. At the time of that writing, 35 states had also extended dates until May 17, 2021, other states had extended to different dates, and two states (Hawaii and New Hampshire) had announced they would not extend dates.

What do these delays mean for you?

Although there will be work involved in accommodating the filing deadline changes, the delay creates an opportunity for you. Take time now to identify which of your clients will benefit from the extension and those which are not affected by the extension. Pace your work over the extended tax season, but do NOT consider the “extra time” to be a break.

"Be intentional with the extension of the tax deadlines. Take time today to create a plan for the next 6-8 weeks," says Joe Woodard, Managing Editor of The Woodard Report and CEO of Woodard Events. "Make the delay work FOR you by creating capacity to work on your business and not just in your business.”

To create your plan, first consider the formidable challenges you, as part of the accounting and bookkeeping industry, are facing - including technology disruptions, enterprise-level competitors, increased commoditization, stifling workloads, an imminent retirement bubble, and clients who devalue accounting services. Which of these challenges are most impacting you and your firm?

Then, determine which challenge you should begin to tackle over the next 6-8 weeks:

• Modernizing your practice,
• Standardizing your processes,
• Deploying highly efficient and scalable business models,
• Developing a distinctive brand
• Increasing your technical proficiencies, and
• Effectively pricing your services.

Although you probably will not solve the challenge immediately, you will be able define a path and begin working toward that solution by relying on a variety of resources ranging from free webinars to coaching programs and boot camps. Set an educational calendar for you and your team members and schedule time each week to learn how to tackle your challenges.

Remember, the delay is for tax filing deadlines. It is not a cause to delay working ON your business.