Should the March 1 Tax Deadline Be Eliminated?

Farmers who file and pay all of their income tax by March 1 are allowed to not make an estimated tax payment on January 15. This is commonly called the farmer tax due date. However, it is not a formal due date but rather just allows the farmer not to have to make any estimated tax payments.

The IRS released IR 2022-39 on the 17th reminding farmers that deadline was approaching. However, many farmers will not be able to E-file their income tax returns this year by March 1. Form 7203 for keeping track of their S corporation tax basis will not be available until after March 1.

Filing a manual return is becoming very problematic especially with the issues that the IRS is having with getting caught up with over 20 million documents still not processed including who knows how many 2020 income tax returns. It is our guess that most of those returns were filed manually.

It is very easy to make your estimated tax payment on January 15. It is the lessor of 100% of 2020 income tax or two-thirds of this years tax. If you make that payment, then you are not required to file your return until April 15. Economically in many cases you are better off making the estimated tax payment or simply incurring the tax penalty since in many cases it is fairly minor.

It is called a penalty since that sounds worse than calling it an interest charge which it is. It is currently based on a 3% interest rate from January 15 until the date of payment.

As example, assume your 2020 tax was $5,000 and you expect to owe $20,000 this year. You are required to pay $5,000 on January 15 and you can pay the remaining $15,000 on April 15. Or simply pay $20,000 on April 15 plus a penalty of about $37 if you don’t want to take the time to make the January 15 estimate payment.

With the extra complexity due to the new Form K2/K3 for partnerships; the new Form 7203 for S corporations; and the continued delays in processing by the IRS, it is probably now time to eliminate the March 1 filing deadline. Most of our farmers no longer file by March 1 and there are many good reasons why.