Should Texas Farmers File by March 1?

The snow and ice storm that hit Texas earlier this month resulted in President Biden declaring it a federal disaster.  Many tax items and dues dates are automatically extended when there is a disaster declaration.

Texas farmers now have a tax due date of June 15, 2021 instead of April 15, 2021.  However, many farmers elect to file by March 1. If they file and pay 100% of their federal taxes by this date, there is no requirement to pay an estimated tax payment on January 15, 2021.

However, does the disaster declaration extend this filing deadline?  Revenue Procedure 2018-58 lists all of the tax acts that are extended when there is a disaster declaration.  The March 1 farmer filing is not listed in this Procedure.  Since it is not listed and a farmer files after March 1, the IRS may send a letter stating that they owe an underestimated tax penalty.

The proper calculation of this penalty appears to be based on the lower of (1) 100% of 2019 federal tax or (2) 2/3rd of 2020 tax times 3% times 27 days (January 15, 2021 to February 11, 2021 when it was declared).

Here is an example:

Assume Farmer Jones had a 2019 tax liability of $25,000 and owed and paid $50,000 on June 15, 2021.  His required estimated tax payment was $25,000 and the penalty would be $55.  However, the IRS may calculate it as $310 (151 days times $25,000 times 3% divided by 365 days).

It may not be worth a letter to the IRS if they assess the extra $255, but just be forewarned that if you elect to pay after March 1, it may result in a letter from the IRS.