Update: The Internal Revenue Service confirmed Wednesday that the federal tax-filing deadline will move from April 15 to May 17. The original date was set at May 15, but this year that falls on a Saturday; it is customary for Tax Day to push to the following business day.

Here’s what we know so far about the tax deadline extension for 2021:

What does the tax deadline extension do?

First and foremost, the extension allows individual taxpayers to “postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of amount owed.”

Importantly, individual tax filers do not need to file any forms or make other sorts of requests to receive the extension.

Corporate filers likely still must comply with the April 15 deadline. That also goes for those who make quarterly payments.

You can read the full IRS announcement here.

Why did the IRS give an extension?

As first reported by CNBC and The New York Times, the IRS wants to give both tax filers and tax preparers more time to navigate the unusual circumstances surrounding the COVID-19 pandemic and the latest federal tax bill.

In short:

The IRS is overwhelmed and behind schedule.

Several news outlets report that the IRS is very far behind 2020 filings (coronavirus a big reason why), and they’ve delayed the start of filing season until February 12th (roughly two weeks later than usual).

Tuesday morning more than 100 members of the U.S. House of Representatives signed a letter on behalf of their constituents asking the IRS to postpone tax deadlines.

Oh, and don’t forget…

Congress just passed a brand new round of direct payments to taxpayers as part of a massive $1.9 trillion spending package. Sending $1,400 checks seems easy, but remember the IRS must go through each tax filer to make sure they qualify and, if so, how much they should get.

Does the IRS extension affect 1031 exchanges?

We aren’t sure, but we doubt it.

The IRS has not given full guidance (though they promise that is coming soon). But it seems unlikely to change the 45-day and 180-day deadlines for active exchanges.

This is different than last year’s extension to July 15, 2020, which coincided with automatic extensions for active 1031 exchanges.

Of course, anything is possible.

We will keep our eyes out and let everyone know if we hear different.

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Does the extension affect state income tax filings?

This is the big caveat.

States will decide on a per-case basis whether to keep the April 15 deadline for state tax filings.

Of course, nine states do not have an income tax. So this isn’t particularly relevant for residents of Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, or Wyoming.

Here’s what the IRS said: