Posts Tagged ‘2020.Tax.Season’

The Dead Need Not Amend (Even When They Have To)

Friday, September 25th, 2020

When I eventually go to the pearly gates, I assume I’ll be leaving income tax behind. It would be a rather rude surprise to find I have lifetime employment in the great beyond, too.

This past week I needed to amend a 2019 federal return. A couple left off one item from their return. It had no impact on their tax, but the return did need to be amended. The IRS is now allowing amended 2019 federal returns to be electronically filed, so after obtaining the signature document I efiled the return. That’s a lot more efficient than mailing the return to the IRS.

But the return was rejected, because the spouse was deceased. That was true, and was noted on the originally filed return. The original return was electronically filed, so I couldn’t see why the amended return couldn’t be. Silly me, I missed yet another exception to the ability to electronically file amended returns. You cannot electronically file an amended return if a spouse is deceased. This wasn’t listed in any of the IRS notices announcing electronic filing of amended returns.

Unfortunately, that exception is real and is an IRS issue. My software company confirmed it’s an IRS programming issue and at least for now any amended return with a deceased taxpayer needs to be mailed to the IRS. Still, at least most 2019 amended returns can be electronically filed.

The Perils of Waiting to the Last Minute

Thursday, September 17th, 2020

The extended deadline for partnership and S-Corporation tax returns was this past Tuesday, and all of our returns were completed and filed that could be (but one). And that one client understood the issues with late filing–but more on that in a moment.

However, we were lucky in that we don’t use software from Wolters Kluwer. Users of that software (such as CCH) could not efile returns on September 15th. That’s an issue when it’s a deadline date. Many years ago, we were impacted when ProSeries (the software we use, made by Intuit) suffered a similar failure on the regular individual deadline date. That year, the IRS extended the deadline by a day. It’s quite possible the IRS will offer such relief to users of CCH this year.

Not only can technology issues happen on a deadline day, but if you wait to the absolute last minute you don’t have time to effectively review the return. This impacted one of our clients. She thought the income number from the partnership should be half of what we’re showing. The numbers on the tax returns exactly match the financial statements, so she needs to review the financials to find the errors. (I did not discover any errors, but she is intimately familiar with the business and errors should stand out more to her.) When you wait to the last day, the clock does strike midnight. She elected to file her return late (possibly using First Time Abatement to avoid penalties) as she wants her return to be correct.

We’re less than two weeks away from the extended deadline for trusts and estates and less than a month away from the extended deadline for individuals. Now is a very good time to send those last documents to your tax professional (indeed, our deadline to guarantee returns are timely prepared was earlier this week). It’s not yet time to panic (except for trusts and estates), but it soon will be for individuals. If you haven’t gotten everything together, you really need to start now. The penalties for late filing are severe, and if you don’t file by October 15th (unless you reside in one of the federal disaster zones) are severe (25% late filing penalty). It’s not a day late and a dollar short; it’s a day late and lots of dollars short.

IRS Extends Tax Deadlines for Victims of Iowa Derecho & California Wildfires

Tuesday, August 25th, 2020

The IRS announced yesterday that they have extended tax deadlines for victims of both the derecho that hit Iowa and the ongoing California wildfires. The specific counties impacted can be found on the Federal Emergency Management Agency (FEMA) website.

For both disasters, tax deadlines are extended that began on August 10th for the derecho and August 14th for the wildfires until December 15th. This impacts 2019 personal tax returns on extension, business returns on extension, payroll tax filings, and estimated tax payments. California’s Franchise Tax Board automatically extends deadlines for federal disasters, so those impacted have identical extensions for California taxes. I assume the Iowa Department of Revenue will similarly extend Iowa deadlines.

Unfortunately, it looks like we’ll also be looking at victims of Hurricane Laura in Texas and/or Louisiana later this week. The IRS recently posted information on safeguarding records for natural disasters; your insurance company likely has additional information available. The cliche is that an ounce of prevention beats a pound of cure–but it is good advice.

That Direct Deposit from “IRS TREAS 310” Is Legitimate

Wednesday, August 19th, 2020

Taxpayers who filed after April 15th are being paid interest on their refunds. The IRS issued a press release earlier this week, stating:

This week the Treasury Department and the Internal Revenue Service will send interest payments to about 13.9 million individual taxpayers who timely filed their 2019 federal income tax returns and are receiving refunds.

The interest payments, averaging about $18, will be made to individual taxpayers who filed a 2019 return by this year’s July 15 deadline and either received a refund in the past three months or will receive a refund. Most interest payments will be issued separately from tax refunds.

In most cases, taxpayers who received their refund by direct deposit will have their interest payment direct deposited in the same account. About 12 million of these payments will be direct deposited.

Everyone else will receive a check. A notation on the check − saying “INT Amount” − will identify it as a refund interest payment and indicate the interest amount.

Several clients asked this morning about mysterious direct deposits from “IRS TREAS 310,” wondering what these were. That’s the interest on your refund from April 15th until the date you filed.

Do note that the interest you receive is taxable. You will receive a Form 1099-INT in the mail from the IRS next January and you will need to include that on your 2020 tax returns.

No, Please No

Wednesday, June 24th, 2020

A brief story in today’s Wall Street Journal (Pay$ Link) states that Secretary of the Treasury Mnuchin may consider extending the July 15th tax deadline (which was, of course, originally April 15th) again. Quoting the Journal,

Asked in an interview at a virtual Bloomberg event if he was considering another delay to Sept. 15, Mr. Mnuchin said it is possible.

“As of now we’re not intending on doing that, but it is something we may consider,” he said.

My reaction is what I titled this article: No, please No. I and every other tax professional would like this Tax Season to end.

The article also notes that another stimulus program is now being considered, but Republicans would want it to be very targeted. Given that Democrats want everything under the sun, it will be quite interesting to see what (if anything) comes out of Congress this Summer.

Not Only Incoming Mail is Backlogged at the IRS

Thursday, June 11th, 2020

This morning, our IRS Stakeholder Liaison held a conference call on the current IRS situation. One unfortunate piece of information that was noted is that not only does the IRS have a backlog of incoming mail (estimated at well over 10 million pieces), there is a very large backlog of outgoing mail. As of early this week, the IRS has a backlog of 23.5 million notices.

With the IRS gradually reopening, this is a backlog that’s going to take months to resolve. The IRS has the capability of mailing 1.5 million notices per week. That means there’s nearly a four month backlog. This week, I received an IRS notice for a client for the first time in months, so the IRS is starting on this. Per today’s call, the IRS is concentrating on notices that are time sensitive (such as Notices of Deficiency).

There are also going to be issues with the notices. These notices are computer generated, so the deadlines in the notices will be wrong. The IRS is including a flyer explaining this along with the new deadlines, but how many taxpayers actually read an insert?

The 23.5 million notices does not include notices that will be generated based on returns as they are processed, and the backlog of correspondence that must be processed. I’m telling clients that have responded to IRS notices to think that it will likely be several months before they hear anything.

Unfortunately, there’s nothing the IRS can do at this point but to start on the process and let practitioners know of the issues. This is a year to be patient with the IRS.

IRS Reopening More Offices in June

Friday, June 5th, 2020

On June 1st the IRS opened offices in Kentucky, Texas, and Utah. That’s important for those of us in the tax professional community as two of the major IRS Service Centers for processing returns are in those states (Austin and Ogden). Austin also includes the unit that processes ITIN applications (a news report said there’s a backlog 250,000 applications). Ogden has one of the three CAF units (the unit that processes power of attorney and tax information authorization forms); that was backlogged even before the shutdown.

The IRS is opening more offices later this month:

  • Georgia and Tennessee: June 15th
  • Missouri and Michigan: June 15th
  • Indiana and Ohio: June 29th
  • California, Oregon, and Puerto Rico: June 29th

This includes the Atlanta and Memphis Service Centers on June 15th and the Fresno Service Center on June 29th. Atlanta and Memphis are not used for processing returns but are used for numerous other IRS operations including correspondence audits, offers in compromise, and automated underreporting unit notices. Fresno is a major processing center for returns.

This is good news for everyone (taxpayers, tax professionals, and IRS employees). Unfortunately, it is going to take many months for the paper backlog to be resolved.

Patiently

Wednesday, May 20th, 2020

Two clients asked me about their tax refunds this week. Both had filed several weeks ago, and each had received their state refunds. Neither had received their federal refunds. With the IRS phone lines for practitioners now working (albeit with a reduced staff), I called the IRS for both clients.

The first client’s return was filed at the end of March. The helpful IRS phone agent told me there was a ‘processing error’ with her return, and the problem is normally resolved within one to four days by the “Error Resolution Department.” Unfortunately, that departments isn’t working right now, so her return (and likely hundreds or thousands of others) is waiting for the IRS Service Centers that process returns to reopen.

The second client filed just one week later; their return simply hasn’t been processed. Yes, it was electronically filed, but for some unknown reason it’s sitting in a queue (virtually, I suppose) waiting for some IRS employee to hit “Run.” Again, with no IRS employees working in the Service Centers right now that return could be processed today or a month from today or months from today.

My suspicion is that IRS Service Centers will reopen in June, and that the unprocessed returns and returns waiting for error resolution will be resolved then. On the other hand, if you have to mail a tax return that return will be processed sometime. I have a couple of 2016 returns that had to be mailed, and I told my clients I expect they’ll be processed by year-end.

I’m not optimistic about correspondence sent to the IRS. I have two correspondence audits and several other open issues with the IRS. In good times the IRS can takes many weeks to answer the mail; I’ll be thrilled if I receive responses by October.

Everyone needs to have some patience. This isn’t the choice of the IRS, and they want to resolve all the issues, too.

Ten Days (More Kudos to the IRS)

Wednesday, May 6th, 2020

We owe tax almost every year. Yes, I make estimated payments, but my business has been growing, investments are making money, so my tax bill goes up every year. That means when I initially looked to see when our stimulus payment (aka “Recovery Rebate” payment) would come on the IRS’s “Get My Payment” website, nothing showed for us.

Additionally, we always file an extension as we wait for a K-1 that shows up in late July or early August every year. The IRS’s website was designed for 2019 filers; the IRS later added 2018 information. That was another reason it didn’t work for us.

On the weekend of April 25th, the IRS added 2018 capability and the ability for those who file $0 returns to use the Get My Payment website. (Zero dollar returns are common for individuals who file extensions, paying the tax they owe, and then later file the actual tax return.) On April 25th, I entered the required information.

On Monday, May 4th, the website noted that the stimulus payment would be direct deposited on Wednesday (May 6th). The IRS was wrong: the money was in the account on Tuesday (May 5th). That’s ten days, and the IRS deserves kudos for this. Indeed, given the constraints the IRS is operating under, this is a superb performance.

Yes, more work is needed for the Get My Payment website. It doesn’t work for expatriates (individuals residing outside the United States), many of whom do qualify for the payments. But overall the IRS deserves praise for getting this done and being able to serve most Americans within 30 days of the legislation passing.

IRS’s “Get My Payment” App Now Works for Most 2018 Filers

Friday, April 24th, 2020

If you filed your 2018 return but haven’t filed 2019, and you wanted to update your information on the IRS’s “Get My Payment” App, you’ve been frustrated because it hasn’t worked. Last night, the IRS updated the information to include such individuals in the app, and most (but not all) can now enter their banking information for direct deposit of the stimulus checks. It’s worth trying if you (like me) are in that situation. I was able to enter my banking information, so I should receive a direct deposit in the next couple of weeks.

There is one group of taxpayers who will not be able to use the app: Those with $0 balances who filed. If you filed your 2019 return (or 2018 return if you haven’t filed 2019) and the tax due was $0 (neither owing tax nor receiving a refund), the app will not work for you, and you will have to wait for a check in the mail (unless the IRS makes another update to the app).