The IRS announced last week a May 17 deadline for filing 2020 personal income tax returns. However, that filing extension did not include the first quarter estimate due on April 15, 2021.
There is a fairly easy way of receiving an “extension” of your first quarter estimate and that is to file an extension by May 17 and include the first quarter (and even second quarter since it is due less than a month later) estimate amount in the extension payment.
When you finally file your income tax return by October 15, 2021, you simply apply all of the overpayment toward your 2021 income tax. This results in paying for your first quarter estimate on May 17 instead of April 15 and should result in no penalties assuming you have paid in enough with the extension.
For most farmers this does not apply since your only estimate is due January 15. But many farmers have too much other non-farm income to qualify as a “farmer” for purposes of estimated tax requirements. This is especially true now that trades of farm equipment result in income that does not count as farm income.
Also, the IRS enjoys calling this a penalty (which is what Congress originally called it), but it is really an interest charge. The current rate is 3% and many taxpayers would rather have their funds working in the business and will simply pay the “interest” penalty each year.
But if you want to escape the penalty and pay your first quarter estimate on May 17, we have shown you one method.
