BACKGROUND

The Internal Revenue Service (IRS) provides automatic 60-day extensions for filing most tax returns after federal emergency or major disaster declarations. The extension also applies to payroll withholding and estimated payments. IRS policy is to provide a 120-day extension in these circumstances. While automatic extensions are fiscally challenging for states, unexpected additional extensions compound the strain. In addition to creating a cash flow problem, the filing delays mean states do not have sufficient data on which to base state revenue forecasts.

PROJECT DESCRIPTION

The Academy will conduct comprehensive research and analysis to examine how disaster declarations affect tax extension periods in states and the IRS decision-making process in determining the extension duration. The objective of this engagement is to improve state and IRS coordination, communication, and decision making.