On March 19, Gov. Ralph Northam announced that Virginia businesses and individuals who may be running low on cash due to the COVID-19 pandemic could have an extra month to pay their state income taxes. But the Northam administration specified that the state’s May 1 filing deadline, a date fixed in state law, would not change.
Two days later, federal officials announced they had extended the federal payment and filing deadline from April 15 to July 15.
Together, the two moves have reversed the normal tax calendar, with state income tax returns due months before federal returns, a scenario that Virginia accountants say could throw the upcoming tax season into turmoil.
As of Friday afternoon, 34 states had pushed some or all of their income tax deadlines to July 15 to sync with the new federal timeline, according to the Association of International Certified Professional Accountants.
Virginia is not among them, despite an appeal from the organization that represents the state’s accountants.
Because the two returns are linked together, the Virginia Society of Certified Public Accountants said in a recent letter to Northam, sticking to the earlier state deadline makes the federal extension useless for Virginia filers.
The VSCPA asked the Northam administration to push back the state deadline to July 15 to sync up with the federal timeline and to clear up any confusion for Virginia filers who might be hit with penalties for mistakenly believing they can put off their taxes until the summer.
The accountants’ group acknowledged that extending the state deadline could be a major blow to the state budget, requiring the state to delay some $2 billion in revenue that would help keep government services functioning during a public health and economic crisis.
“However, we believe that the federal extensions have made it increasingly difficult for Virginia not to find a way to provide similar relief without creating tremendous compliance challenges for Virginia’s taxpayers and tax practitioners,” Gary R. Thomson, the chairman of the VSCPA, wrote in the letter to Northam. “We urge you to work with [Finance Secretary Aubrey Layne] and the General Assembly to quickly address this problem to prevent further chaos and confusion for Virginians.”
With the economy largely shut down due to the COVID-19 pandemic, governments across the country are exploring ways to offer financial relief to those impacted by the crisis. Extending income tax deadlines is seen as one way to help cash-strapped individuals and businesses get through the next few months.
Anyone who wants to file their return and pay any taxes owed can do so under the normal timetable to steer clear of any penalties, interest or deadline confusion.
In an interview, Layne, a CPA himself, said there are both legal and fiscal constraints that make it virtually impossible to extend the state filing deadline. The big one, he said, is Virginia being in the middle of passing a new budget set to take effect July 1. Even if he had the authority to push billions in tax revenue into mid-July, he said, forgoing that money until the next budget year could wreck the current budget and require immediate cuts.
“In terms of all that we’re having to deal with, in terms of public health, I think these guys are making this much more of an issue than it is,” Layne said. “We’ve accommodated them all that we can.”
Layne noted that Virginia offers an automatic six-month extension for late filers, and he said the state will be “very liberal” about abating the penalties for filing late.
“I think we need to use a little common sense here as to the crisis we’re facing and trying to be accommodating to all of the constituents and making sure we have services available,” Layne said.
Because Virginia’s May 1 filing deadline is set in state law, extending it would likely require General Assembly action. Though some legislators have called for a special session on pandemic relief, Democratic General Assembly leaders and Northam appear content to hold off until lawmakers return to Richmond on April 22 for the regularly scheduled reconvened session.
Del. Vivian Watts, D-Fairfax, chairwoman of the House Finance Committee, said policymakers are discussing what can be done to make sure Virginians who take advantage of the federal extension aren’t penalized by the state. But unlike the federal government, she said, Virginia has a constitutional obligation to balance its budget and not run deficits.
“I can assure you people are paying attention to it,” Watts said. “But we want to make sure we have the right answer.”
Stephanie Peters, the president and CEO of the Virginia Society of CPAs, said her organization understands the state is in a “tough situation.” The accountants’ concern, she said, is that the Virginians will hear Tax Day has been moved to July 15 without understanding their state hasn’t followed suit.
“They hear that the tax deadline was extended to July so they just think everything is,” Peters said. “And not everything is.”