The IRS has delayed this year’s federal tax deadline until Oct. 16 for Bay Area residents and business owners as part of a special reprieve for parts of California affected by severe winter storms. But the state has not followed suit, and it’s unclear whether it will.
It’s not the first time the feds have changed the deadline because of inclement weather. The new IRS deadline replaces an earlier storm-related extension for federal taxes until May 15. The deadline for 2022 contributions to Individual Retirement Accounts and Health Savings Accounts was extended to Oct. 16.
In California, tax authorities previously matched the May 15 federal-level extension for all Bay Area counties, but as of Tuesday afternoon they had not conformed to the second IRS delay. The bottom line? While Bay Area residents can technically put off filing their federal tax returns, they may still need to get all of their paperwork in order by spring for state returns.
The state Franchise Tax Board said it was reviewing the IRS extension and would post information soon on the Franchise Tax Board website. But Oakland accountant Jong Lee of The Lee Accountancy advised most taxpayers to leave themselves time to file and pay, avoiding possible penalties and interest.
“Do not wait,” Lee said. “Go ahead and pay now.”
Residents and business owners in Santa Clara, San Mateo, Alameda, Contra Costa, Solano, San Francisco, Marin, Sonoma, Napa and Santa Cruz counties are among those across the state qualifying for the federal-level delay — even if they were not directly affected by the catastrophic weather and flooding, the IRS said.
High-income taxpayers with large tax bills could wait to pay until the deadlines and invest the money in the meantime, Lee said. But such taxpayers often have complex tax situations and could risk penalties and interest payments if they wait too long to put together and send in their returns, he said.
The IRS issued its delays in response to a disaster declaration from the Federal Emergency Management Agency after a series of winter storms pummeled California and created widespread damage and chaos from landslides, flooding and surging ocean waves.
The IRS will automatically identify taxpayers in storm-affected counties such as those in the Bay Area as eligible for the extended deadline, the agency said.
Both Lee and San Jose accountant Giga Kartveli of Kartveli CPA said they expected California would match the IRS Oct. 16 deadline, particularly because the federal extension came in response to events in this state. But accountant James Counts, on the state-taxation committee of the California Society of Certified Public Accountants, said he was not so sure California would match the IRS deadline extension, as state officials facing budget shortfalls might prefer to bring in tax revenue sooner than later.
Counts also advised that individuals and business owners, even if they plan to take advantage of the Oct. 16 filing date for federal taxes, should apply by the original April 18 filing date for the standard filing extension because it is not clear whether the IRS will accept certain tax-related “elections,” such as deducting 100% of the year’s equipment expenses, or making certain elections related to divorce payments.
“By doing the extension, you protect yourself,” Counts said. “A lot of times people don’t know they want to do something on their return until they actually get around to doing their return.”
The more complicated taxes are for a person or business, the sooner they should get to work — in consultation with an accountant if warranted — on their taxes, Lee said.
At the federal level, the Oct. 16 deadline applies to 2022 individual income tax returns that had been due April 18 and to 2022 business returns typically due March 15 and April 18. The Oct. 16 deadline also applies to quarterly estimated tax payments previously due on Jan. 17 and April 18. Individual taxpayers paying quarterly estimated taxes can skip making the fourth-quarter payment previously due Jan. 17, and instead include it with their 2022 return due Oct. 16, the IRS said.
California’s extension to May 15 applies to deadlines falling on or after Dec. 27 and before May 15 and requires submission by that deadline of 2022 individual income tax returns that had previously been due April 18. Quarterly estimated tax payments for California, typically due on Jan. 17, 2023, and April 18, 2023, are also due May 15.
California conformed to extended IRS deadlines in 2020 for 2019 tax returns and in 2021 for 2020 returns because of the coronavirus pandemic.
Source: www.mercurynews.com