Alabama taxpayers can file their state income taxes this year by May 17 without penalty, but a Decatur lawmaker plans to file a bill that would also prevent interest from accruing after April 15 on any amounts owed.
Earlier this month, the U.S. Treasury Department and IRS extended the filing and payment date for individual 2020 income taxes from the traditional April 15 to May 17.
Alabama automatically extends its state income tax filing deadline when there is an extension on the federal level.
But the fine print on the Alabama Department of Revenue’s guidance on the topic said that while it can waive late penalties for payments made by May 17, it is “not authorized to waive interest, and any interest accruing from April 15, 2021, through the actual payment date will be due.”
“Therefore, ALDOR encourages taxpayers to make their payments for the 2020 tax year as soon as possible to avoid the accrual of interest beyond April 15,” guidance from the department said.
It would take a change to state law to waive the interest payments required of taxpayers who don’t file and pay by April 15. Sen. Arthur Orr, R-Decatur, said he plans to file a bill to address this “wrinkle” in the state tax code when lawmakers return next week to Montgomery.
“We need to make sure what the government gives with one hand, such as additional time, it doesn’t try to take back with the other by charging interest during that time,” Orr said Tuesday.
If lawmakers move quickly, legislation could be passed prior to April 15.
“We’ve got time,” he said.
Taxpayers were given a three-month extension to file and pay taxes last year. According to Amanda Collier, a spokeswoman for the Department of Revenue, that emergency order from Gov. Kay Ivey also extended the due dates, effectively stopping interest from accruing.
"The department has the statutory authority to extend return filing dates and waive late payment penalties; however, the department does not have the authority to extend the payment due dates or waive interest that accrues," Collier said in an email. "Last year, the department was granted limited authority in accordance with the governor’s emergency order to extend due dates of the payments. As a result of this extension, interest did not begin accruing on delinquent payments until after the extended payment due date."
Orr said calculating interest owed on their 2020 tax payment for a one-month period seemed like an unnecessary “logistical nightmare.”
And if they calculate wrong, more work to correct the payments would be required of the Department of Revenue.
“All over a few pennies and dollars,” Orr said. “I don’t think it’s worth the trouble to the taxpayers nor the Alabama Department of Revenue to go down this road.”