Richmond Times-Dispatch: Tax dash begins as Northam signs conformity bill, but filing deadline could be delayed

RICHMOND TIMES-DISPATCH, MICHAEL MARTZ

Gov. Ralph Northam has cleared the way for Virginia taxpayers to begin preparing their income tax returns, but the deadline could change because of the ongoing challenges posed by the COVID-19 pandemic.

Northam signed emergency legislation on Monday that takes effect immediately to allow Virginians and businesses to save about $221 million in taxes by conforming the state and federal tax codes to reflect a number of changes Congress made in two emergency relief packages last year in response to the pandemic.

“It should bring certainty to Virginia taxpayers so the tax season can begin,” Secretary of Finance Aubrey Layne said Monday.

But Rep. Abigail Spanberger, D-7th, is pushing the IRS to delay the federal income tax filing deadline from April 15 to July 15 to allow the beleaguered agency time to catch up on backlogged returns from the previous tax year and give taxpayers more of an opportunity to address any outstanding tax obligations.

“Such an extension would help eliminate unnecessary taxpayer anxiety during an already stressful period by providing more time to establish clarity and plan for payments,” Spanberger said Friday.

The federal government officially opened tax season on Feb. 12, more than two weeks later than usual. The Virginia General Assembly debated how much tax relief to grant to businesses that had received tax-exempt, forgivable loans from the federal government under the CARES Act and the Consolidated Appropriations Act adopted by Congress last year.

The second emergency funding package, adopted on Dec. 27, for the first time allowed businesses that received the federal aid to deduct expenses from their taxes, even though the money wasn’t taxed at the federal level. The assembly ultimately adopted a compromise that allows businesses that received the loans or grants from the Rebuild VA program to deduct up to $100,000 in expenses from their taxes for 2020.

The legislation also gave about $121 million in state tax breaks to individual taxpayers to conform with changes in federal law for federal income taxes. The assembly adopted the legislation by two-thirds votes in both chambers to allow the legislation to take effect immediately upon the governor’s signature instead of July 1.

“Obviously, we’re thrilled that it’s finally been signed,” said Emily Walker, vice president of advocacy at the Virginia Society of Certified Public Accountants.

Accountants and other tax preparers have been waiting for guidance from the Department of Taxation, which couldn’t act until the governor signed the legislation into law. Tax practitioners also can now adjust their computer software for processing tax returns to reflect the changes in Virginia tax law.

Some corporations faced a Monday deadline for filing federal returns, although Virginia won’t require those returns to be filed until April 15. Tax returns are due for most Virginia taxpayers on May 1, but that could be delayed if the IRS changes the deadline for filing federal returns to July 15, as it did last year because of the pandemic.

If that happens, Walker said her organization would favor delaying the deadline for state taxes until mid-June.

Virginia moved its filing deadline from May 1 to June 1 last year, which Layne said the state would consider doing again.

But he said the state would not delay tax payments and returns beyond the end of the fiscal year on June 30 because of the budget uncertainty that would create.

“We would consider moving it, but we would not jeopardize our fiscal year end,” Layne said.