July 15 Filing Date — Not to Move

Shutterstock_1682999677What's called a difficult decision is a difficult decision because either way you go, there are penalties.

-Elia Kazan

To advocate effectively on our members’ behalf and deliver the right resources, the AICPA periodically conducts member surveys to gather opinions on various subjects. As we navigate through this ongoing filing season, the AICPA Tax Executive Committee asked Tax Section members for their concerns and opinions regarding the July 15 deadline. The Tax Executive Committee has been carefully considering a decision regarding July 15 since, well, April 15. If you read July 15 filing date — To move or not to move, you know the heart of the matter was whether to move the deadline. We now have an answer — don’t move the July 15 due date. As famous ‘50s and ‘60s Hollywood director Elia Kazan infers above, our decision was complicated and multi-faceted. There were many issues to consider.

In the survey, deployed at the end of May, members were asked two questions:

  1. Based on the current COVID-19 environment and the impact on your tax practice, do you anticipate being able to file returns or extensions for your clients by the July 15 deadline?
  2. Do you believe the IRS should automatically extend the July 15 filing and payment deadline?

The responses, from a very diverse membership, were quite mixed. Although the majority of respondents said they would be able to file returns or extensions on behalf of their clients by the July 15 due date; a plurality of members wanted the IRS to move the July 15 due date to October 15; some members suggested other dates.

Thank you for the 1,000+ comments we received, some of which include:

  • Absence of a due date would cause many of our clients to procrastinate, resulting in an impossible workload close to October 15.
  • We don't want to have these tax returns hanging over our head all year. Some clients wait until the last minute, no matter when the deadline is. We can always extend until October if needed.
  • The firm can work remotely, and we are able to deliver returns and extensions to most clients electronically. We have a plan for the few clients who still need to receive paper returns.
  • Changing the due date was confusing for clients, especially since not all the states conformed, especially with regard to estimated tax payments. Changing it again would only make matters worse.

On the other side of the spectrum, survey respondents said:

  • Impossible to comply; half the staff are teaching their children and working at the same time. Work is coming in second.
  • Fear of the illness on my part as well as my family and clients has made the process much longer and not as efficient.
  • As is typical there are investment reports, K-1s and revised 1099s that are not available.

There were also many comments and expressions of concern about clients’ financial condition. Most members can handle the filing obligation but were concerned about clients’ abilities to pay their tax liability. Some respondents acknowledged that extending the payment date would not make it any easier for clients to ultimately pay taxes owed. This acknowledgement contributed to the AICPA’s decision to develop a letter related to penalty relief and IRS compliance mitigation, which is in development.

Another area the Tax Executive Committee examined closely relates to the Paycheck Protection Program (PPP). Some respondents wanted July 15 postponed because of PPP loan forgiveness work. However, a week after the survey was deployed, Congress passed H.R.7010 - Paycheck Protection Program Flexibility Act of 2020 extending the “covered period” from 8 to 24 weeks. Those additional 16 weeks will put much of the PPP loan forgiveness work right in the middle of the second busy season — Labor Day to October 15.

Other considerations for keeping the July 15 due date: the importance of providing certainty for clients in the context of having a target due date that needs to be met; preventing or limiting the spillover of filing requirements into the next tax year; collecting needed tax revenues for federal and state authorities; and initiating the start of the assessment period.

Finally, there are other practical concerns involved in moving the deadline. We’re hearing that states may not conform to the possible IRS extension of the July 15 due date at the same levels they did in April. In the case of non-conformity, a federal return would have to be completed in order to complete the state return, which means the IRS moving the date would be irrelevant if the state does not conform.

The Tax Executive Committee decided not to advocate for another delay, at this time, but will continue to monitor all the data points that fed into this conclusion. We continue to monitor the IRS’ ability to provide services in these uncertain times and recently submitted a letter to the IRS regarding the electronic signatures, recommending the update of the federal e-signature guidance and authentication requirements relating to standard filing procedures. The AICPA will continue to develop resources to deal with the anxiety and challenges of a difficult year.

Elia Kazan also said, “[e]ffort is all; continue and you may get there despite everything.” For the many reasons discussed above, we believe it’s important to do what you can now. In the current environment, today is as certain as it gets.

Edward S. Karl, CPA, CGMA, Vice President of Taxation, American Institute of CPAs

Chris Hesse, Principal, CliftonLarsonAllen LLP’s National Tax Office, Chair of the AICPA’s Tax Executive Committee