Because of the COVID-19 pandemic, the federal government has delayed from April 15 to July 15 the deadline for filing and paying your federal income tax. The feds have also delayed the deadline for filing federal estimated income tax payments.
The first federal estimated tax payment would have been due April 15 and the second payment of federal estimated tax would have been June 15. Federal payments have all been delayed until July 15.
But what about deadlines on Arkansas income taxes? Arkansas has a mess!
Governor Asa Hutchinson was reluctant to follow the feds in moving the income tax deadline to July 15. Why? Because it shifts the collection of tax revenue from this fiscal year, which ends June 30, to next fiscal year, and therefore reduces the state revenue available to spend between now and the end of June.
Eventually, Governor Hutchinson agreed to copy the feds and move the income tax deadline to July 15, but only for individuals, not corporations.
Most states have delayed their estimated tax payment deadlines, but, the Governor does not appear to have changed Arkansas’ estimated tax deadlines. Before we reach the deadline for paying Arkansas taxes on 2019 income, two estimated tax payments on 2020 income are due. The first Arkansas estimated tax payment on April 15 is already past due and the second payment is due June 15.
The payment of estimated taxes is not something just for rich people. It just depends on the source of your income. If you only have a salary, there is tax withholding. But let’s say you are a hair stylist, where there is no withholding, you are required to make estimated tax payments. Not only has Governor Hutchinson shut down beauty shops, he wants the hair stylists to pay 2020 estimated taxes NOW.
By not delaying the estimated tax payments, Governor Hutchinson has caused a mess and left taxpayers and accountants confused.
Think about this. Your estimated tax is based on your income reported on your income tax return, which now is not due until July 15. How do you estimate future tax payments on something that has not been filed or finalized yet?
Here is an example, some are saying the deadline for putting money into your IRA is now July 15. Adding to an IRA reduces your taxable income. So, your taxable income could go down long after Arkansas requires the two estimated tax payments.
What is the motive for not delaying the payments, like has been done by the federal government and most other states? An attempt to get more revenue collected now so it can be spent in this fiscal year? A trick to collect more money in penalties from confused people who think they have until July 15 to make Arkansas’ estimated payments? Perhaps Governor Hutchinson is just confused by the complexity of income tax law.
Why do things have to be so difficult in Arkansas?