Congress introduces AICPA-backed bill to ease tax extensions

A pair of lawmakers proposed bipartisan legislation to streamline the tax filing extension process.

Rep. Judy Chu, D-California, and Mike Carey, R-Ohio, introduced H.R. 3566, the Simplify Automatic Filing Extensions (SAFE) Act of 2023. Instead of relying on the current rule of calculating a percentage of the current year tax liability, the SAFE Act would allow taxpayers to automatically qualify for a filing extension without worrying about a penalty by paying an easily-calculated amount of 125% of their prior year’s tax liability.

Under current law, the Internal Revenue Code requires taxpayers to pay “properly estimated” tax liability for the current year along with their extension request. If the estimated payment is inaccurate, there’s a risk the extension could be deemed inaccurate, and the taxpayer will owe penalties. In order to comply, filers and their tax preparers need to do time-consuming calculations of the taxes owed by the April filing deadline, just to get an extension. That often means individuals need to put hours of work into their initial estimation, only to repeat the process again in six months to meet the extension deadline.

“Requiring taxpayers who need an extension to calculate their often-complicated taxes twice in a year is repetitive and burdensome,” Chu said in a statement Monday. “Rep. Carey and I are partnering on this commonsense bill to create a simple and easy way to pay estimated taxes while filing for an extension so we can make tax filing season less of a hassle for the IRS and taxpayers. Making it easier to comply with tax law will mean more taxpayers pay what they owe, and government can continue providing essential services.”

The lawmakers hope to make the tax extension process less cumbersome. “Filing for an extension does not have to be stressful, nor should it,” said Carey in a press release. “By simplifying the tax filing extension process and removing the fear of penalty, both taxpayers and the IRS will be better off. I’m proud to partner with Rep. Chu on this bipartisan legislation to make government work better for taxpayers.”

The American Institute of CPAs is supporting the legislation. “For decades, the AICPA has advocated for and promoted the principles of good tax policy before members of Congress, Treasury and the IRS — the SAFE Act is a reflection of good tax policy for taxpayers and practitioners,” said AICPA vice president of taxation Edward Karl in a press release. “Complicated tax returns are often time-consuming for taxpayers and their advisors; simplification of these processes relieves stress on the taxpayer and supports tax compliance. We appreciate the leadership of Representatives Chu and Carey to simplify automatic filings of extensions and we strongly support this legislation.”