March 18, 2021
This update provides information from the Internal Revenue Service and the Illinois Department of Revenue. This is the information available at this time.
IRS Extends Tax Filing Deadline to May 17th
Late yesterday afternoon, the Treasury Department and Internal Revenue Service announced that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15th to May 17, 2021.
According to the IRS news release, taxpayers can also postpone federal income tax payments of the 2020 tax year due on April 15, 2021 to May 17, 2021, without penalties and interest regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. The IRS announcement specifically provided “This relief does not apply to estimated tax payments that are due on April 15, 2021." Additional guidance from the IRS is forthcoming. See IRS announcement.
Although there has been no official announcement from the Illinois Department of Revenue on this matter as of this writing, ICPAS Government Relations has had informal advance discussions with departmental leadership on planning assumptions in anticipation that the Treasury and the IRS would extend the filing and payment deadline for individual taxpayers. Illinois is a rolling conformity state--meaning that the Illinois Income Tax Act conforms with the Internal Revenue Code. Moreover, Section 505(b) of the Illinois Income Tax Act further aligns extensions to the federal returns.
IRS Offers Guidance on Unemployment Benefits Exclusion
The American Rescue Plan signed into law by President Biden on March 11th included tax provisions for the 2020 filing season, four weeks after the IRS began accepting 2020 returns. New exclusion of up to $10,200 of Unemployment Compensation was included in the latest Federal COVID-19 Relief Legislative Package. See PWC Tax Insights for Summary on the American Rescue Plan.
Taxpayers whose modified adjusted gross income (AGI) is less than $150,000 may exclude from income up to $10,200 of unemployment compensation paid in 2020, which means you don’t have to pay tax on unemployment compensation up to $10,200. SEE IRS GUIDANCE. Treasury and IRS Officials are meeting to identify remedial efforts to address those taxpayers qualifying for the exemption who filed before March 11th.
IDOR and Treatment of the American Rescue Act-Nontaxable Unemployment Benefits
Late yesterday afternoon, the Illinois Department of Revenue issued an announcement stating that the department is reviewing the federally enacted retroactive provision making the first $10,200 per taxpayer of 2020 unemployment benefits nontaxable for individuals with an Adjusted Gross Income of less than $150,000. IDOR URGES TAXPAYERS WHO FALL IN THIS CATEGORY TO NOT FILE RETURNS RELATED TO THESE CHANGES AT THIS TIME. Taxpayers who received unemployment benefits last year and have already filed their 2020 tax return SHOULD NOT FILE AN AMENDED RETURN at this time. See IDOR announcement.
ICPAS Government Relations is closely monitoring IRS and IDOR developments and will continue to keep you informed as information becomes available. Practitioners are encouraged to monitor daily tax announcements and incoming information from the IRS and IDOR.