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A look at 2020 and 2021 state individual income tax rates and income brackets

W&M members ask IRS to extend April Tax Day deadline

Tax time
The tax filing season clock is ticking, but will the alarm go off on April 15 as usual? That's the IRS plan for now, but some in Congress and the tax community would like Uncle Sam to extend the 2021 Tax Day deadline like happened last year.

The Internal Revenue Service is insistent that despite a later than normal opening of the 2021 tax filing season, it will end as usual on April 15.

Some lawmakers and members of the tax community, however, think this filing season needs to follow the 2020 example and be extended beyond the usual mid-April Tax Day.

As we all continue to cope with the COVID-19 pandemic's effects on our lives, taxes are now a factor. How to accommodate these tax needs is dividing taxpayers, tax pros and now federal legislators.

Tax writers request more time: In several talks, in late 2020 and earlier this year, IRS Commissioner Charles Rettig has indicated that the IRS is aiming for the usual April 15 filing deadline.

This week, however, eight Democrats on the tax-writing Ways and Means Committee sent Rettig a letter asking him to extend the current filing season. That would mean folks wouldn't have to file for an extension by April 15. 

"It has come to our attention that, due to the ongoing pandemic, many Americans continue to face the same challenges that necessitated extending the filing season last year," wrote the W&M members.

The letter signers are Representatives Bill Pascrell, Jr. of New Jersey (and chair of the W&M Subcommittee on Oversight); Danny K. Davis of Illinois (and chair of the W&M Subcommittee on Worker and Family Support); Judy Chu of California; Gwen Moore of Wisconsin; Dwight Evans of Pennsylvania; Bradley S. Schneider of Illinois; Thomas R Suozzi of New York; and Steve Horsford of Nevada.

They pointed out that last year, taxpayers, practitioners and the IRS were dealing with health and economic challenges due to the pandemic. The agency's decision to push Tax Day into the summer was responsive to those difficulties, wrote the lawmakers.

They argue that a similar response is necessary in 2021, too:

     "One year later, another unique filing season is underway, and many of these same pandemic-related difficulties and challenges persist for taxpayers, practitioners, and the IRS. For starters, health and safety concerns continue to keep taxpayer assistance sites closed and taxpayers homebound. As a result, taxpayers are having a much harder time receiving the crucial assistance they are accustomed to and require. These challenges are especially acute for low-income taxpayers with limited digital or English proficiency.

     Further, an added challenge this year is the condensed filing season, as April 15 will come just two months after the opening of the 2021 filing season.

     Importantly, as well, the IRS is still processing millions of returns from last year and has had less time to adjust to the training and safety needs of newly-hired or recalled employees."

And, if you'll allow me a personal digression, let's not even get into the historic winter storm that's just now winding down in Texas and many parts of the Eastern United States.

The Representatives don't suggest a new Tax Day 2021 date. They just ask Rettig to consider the change and, if agreeing, to announce it soon.

Split sentiments on W&M and tax community: But, as noted during a discussion of the letter by members of the informal #TaxTwitter group, Ways and Means Committee Chairman Richard E. Neal (D-Massachusetts) did not sign the letter.

It's also worth noting that the professional tax community also is split on whether to again extend the filing season.

Ally Versprille, senior reporter covering IRS and Treasury for Bloomberg and the one who kicked off the social media conversation on an extended 2021 tax season, pointed to a recent National Association of Tax Professionals (NATP) survey of tax professionals. Around 53 percent said they wanted another three-month extension similar to last year.

Tweeting yea and nay: Several tax pros on Twitter, at least for now, seem to be in the 47 percent who want to stick with the mid-April end to the 2021 filing season.

"Please no. I need my summer back!" tweeted Jennifer Berning. That same sentiment was shared by Robert C. Farrell, who agreed, tweeting, "And here I was, with my hopes up about a vacation this summer.

And Laura Ann got graphic, literally, in her opposition to an extended tax deadline.

 

My fellow Austin resident, tax accountant Brian Streig, however, is for an extended Tax Day.

 

States affected, too: As I noted, Brian and I live in Texas. It's one of just eight states without any kind of individual income tax.

Joining the Lone Star State in not taxing filers on any of their personal earnings are Alaska, Florida, Nevada, South Dakota, Tennessee, Washington and Wyoming. They are the ones grayed out in the Tax Foundation map below.

2021-state-income-tax-rates-2021-Tax-Foundation

Tennessee used to tax interest and dividend income, but those collections ceased effective this Jan. 1. Sorry, though, Volunteer State taxpayers, you still have report and pay tax on your 2020 investment earnings this filing season.

And note the striped New Hampshire. The Granite State still taxes individuals' interest and dividends, but is phasing out that tax by 2025.

Majority of states follow IRS timing lead: The other 42 states and Washington, D.C., however, have individual income taxes. Most of them also usually follow the IRS lead in filing season, setting the timing of their filing seasons and deadlines in concert with Uncle Sam's tax agency.

That's because many of those state tax returns use federal filing data as part of their filing process. Taxpayers have to do their federal returns before they can start on their state taxes.

If the deadline is pushed back, states, many of which are desperate for the annual tax collections due to the economic hits they've taken during the coronavirus pandemic, will have to wait for their money.

And states, unlike the federal government, typically can't run budget deficits. No or not enough income tax collections means they will have to cut services or find other sources of money to keep their state operations going.

I suspect that the IRS will ask for state tax offices' input about a later than April 15, 2021, filing deadline. If the agency doesn't, I'm sure it will hear from those state tax offices anyway.

Want more time, or on target for April 15? What are your thoughts, as a tax pro and/or taxpayer?

Do you already know that you need beyond April 15 and would like the IRS to move the deadline so you don't have to file for an extension?

Or are you ready to gear up and get your (and clients') taxes done by April 15?

You also might find these items of interest:

 

Coronavirus Caveat & More Information
In 2020, we're all dealing with extraordinary circumstances,
both in our daily lives and when it comes to our taxes.
The COVID-19 pandemic and efforts to reduce its transmission
and protect ourselves and our families means that,
for the most part, we're focusing on just getting through these trying days.

But life as we knew it before the coronavirus will return,
along with our mundane tax matters.
Here's hoping that happens soon!
In the meantime, you can find more on the virus and its effects on our taxes
by clicking Coronavirus (COVID-19) and Taxes.

 

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