The Treasury and the IRS have just announced that they are providing an extension to individual federal income tax payments for the 2020 tax year. Instead of the previously published filing date of April 15, 2021, you now have until May 17, 2021 to file.
This change is to factor in the exceptional economic circumstances caused by the pandemic and will be applied to most (but not all!) taxpayers.
For many Etsy sellers, this new tax filing date will most likely not have much of an impact on your cash flow or finances this year. Why? The IRS has specified that the extension will not apply to anyone that pays estimated taxes - this excludes more than 9 million individuals and businesses from this relief. If you are a sole proprietor or a partnership and are scheduled to pay 2021 estimated taxes, you’ll still need to pay your federal tax estimate by the usual April date to avoid interest and penalties.
Another thing to keep in mind as an Etsy seller is your state tax obligations. Many sellers tend to file both federal and state at the same time as most states line up with the same dates. As this date has moved forward this year, you’ll want to keep in mind that most states haven’t made the same change, so ensure you have both dates marked on your calendar!
It is hoped that the states will follow the IRS’s lead on this, however at the time of writing, only Massachusetts has moved their filing forward (Louisiana, Oklahoma, and Texas have already moved to June due to the winter storms earlier this year). You’ll want to ensure that you follow developments in your nexus states to ensure you are aware of the final filing dates this year.
If your state does not end up moving their date, you may find it easier to file both on the same date as usual if you need to pay your estimated tax obligations anyway. However, if you are due to receive a tax refund, you should aim to file your tax return as soon as possible to get that money back. If you are not yet familiar with the tax changes that came into effect this month via the American Rescue Plan, you might like to use the extra time to do some research to make sure you are completing your returns correctly.