When the IRS extended the income tax filing deadline to May 17, that did not affect filing dates for state taxes. Arizona lawmakers are expected to extend the state deadline to May 17, but while they work on the issue, tax preparers wait and worry. (Photo by Philip Taylor, ptmoney.com/Creative Commons)
WASHINGTON – The IRS this month extended the tax-filing deadline to May 17 to allow for complications from COVID-19, but in Arizona the due date remained April 15 – until Monday.
The Legislature last week approved an extension to May 17 and the governor signed it into law Monday, just 10 days before state taxes would normally have been due. That has left tax professionals in a bind, said John Baumer.
“There’s this lack of clarity that is definitely unhelpful for CPAs and their clients,” said Baumer, the director of government relations for the Arizona Society of CPAs.
The shakeup began on March 17, when IRS Commissioner Chuck Rettig announced that the deadline to file federal income tax returns would be pushed back to May 17 because of the pandemic.
“This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” Rettig said in a press release announcing the change.
That set off a scramble in the Legislature, where the House Ways and Means Committee last week took a Senate bill dealing with optometrists’ contracts and rewrote it into a bill delaying tax day until May 17. The rewritten bill passed the House 58-0 Wednesday, and it cleared the Senate by a 28-0 vote Thursday, and Gov. Doug Ducey signed it into law Monday.
While the emergency legislation has won final approval, that has not quelled the “frustration and confusion” felt by accountants as the traditional April 15 deadline loomed.
And the calendar is not the only complication with taxes this year.
David Freeland, executive administrator of the Arizona Association of Accounting and Tax Professionals, said lawmakers still have to pass conforming legislation to align Arizona taxes with the many changes in federal law that came with passage of different pandemic-relief measures over the past year.
He pointed to a provision of the American Rescue Plan, for example, that exempted up to $10,200 of unemployment benefits for some households. Freeland said lawmakers have yet to address how that will affect Arizona taxes, “so, it’s going to be an interesting situation here.”
Rep. Shawnna Bolick, R-Phoenix, and chairman of Ways and Means, said Wednesday that lawmakers are working on language to address federal and state tax conformity.
Baumer also noted that the state requires taxpayers to have filed their federal tax returns before their state returns if they wish to file their state returns electronically. He said he would “bet heavily that most, if not all of them (accountants), are telling their clients to wait until there is clarity from the Legislature before filing.”
“I’m sure there are many CPAs and tax preparers out there that have had to do the majority of the work for building or preparing the filings for their clients,” but Baumer said the message from most for now is probably “hold off until we know more.”
Add the fact that the IRS is grappling with changes to the tax code and distributing pandemic payments at a time when many employees are still working remotely, and the situation is made even worse. That has multiple professional organizations arguing to the IRS that a one-month filing extension for individual taxpayers may not have been enough.
“The preparers, the CPAs … are not real happy with this,” Freeland said of the IRS extension. “They feel that this should’ve been farther out.”
While tax professionals are keenly aware, Freeland said the public’s response to all the changes “is probably 50/50.”
“As far as the public, it is what it is,” Freeland said. “Some people are happy. Some people are sad. The procrastinators get the chance to procrastinate more. Those that have refunds are already pushing to get the refunds in.”