Posts Tagged ‘2020.Tax.Season’

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).

When Will the Stimulus Checks be Mailed?

Thursday, April 23rd, 2020

Something I missed was an article in the Washington Post giving details of mailing stimulus payments. The Motley Fool took it and laid out the dates that stimulus payments will be mailed. I note those dates below.

But there’s another issue: Let’s say your Adjusted Gross Income (AGI) is $55,000 and you haven’t filed your return. You file it on May 1st. Will you get your stimulus check the week of May 29th (assuming you don’t use direct deposit)? Probably not. (The IRS will be mailing checks out for that AGI range that week.)

The issue here is it takes time for both a tax return to get into the IRS computer system and for the IRS to mail a check. First, it takes four weeks (on average) for a return to post into the IRS computer system from date of filing. Second, it takes two weeks (on average) for the IRS to issue a check. That is, if the IRS hits a button to issue you a check today, you would receive that check in two weeks.

So let’s look at the mailing dates:

  • AGI of $10,000 or less: Week ending April 24
  • AGI of $10,000 to $20,000: Week ending May 1
  • AGI of $20,000 to $30,000: Week ending May 8
  • AGI of $30,000 to $40,000: Week ending May 15
  • AGI of $40,000 to $50,000: Week ending May 22
  • AGI of $50,000 to $60,000: Week ending May 29
  • AGI of $60,000 to $70,000: Week ending June 5
  • AGI of $70,000 to $80,000: Week ending June 12
  • AGI of $80,000 to $90,000: Week ending June 19
  • AGI of $90,000 to $100,000: Week ending June 26
  • AGI of $100,000 to $110,000: Week ending July 3
  • AGI of $110,000 to $120,000: Week ending July 10
  • AGI of $120,000 to $130,000: Week ending July 17
  • AGI of $130,000 to $140,000: Week ending July 24
  • AGI of $140,000 to $150,000: Week ending July 31
  • AGI of $150,000 to $160,000: Week ending August 7
  • AGI of $160,000 to $170,000: Week ending August 14
  • AGI of $170,000 to $180,000: Week ending August 21
  • AGI of $180,000 to $190,000: Week ending August 28
  • AGI of $190,000 to $198,000: Week ending September 4
  • All other checks: Week ending September 11

So let’s say you did not have a 2018 filing requirement, and you file your 2019 return with an AGI of $65,000 and owe tax; your check would be issued the week ending June 12. But let’s say you file your return on June 13th; in that case, your check would be issued at the end (the week of September 11th).

We believe that if you are “missed” by the IRS you can use the IRS’s Get My Payment tool after your return is filed to convert your check to a direct deposit.

A key point is that these are the dates of mailing, not the date your check is generated. So you need to subtract two weeks for the date the check is generated. You also need to subtract four weeks for the date a return gets into the IRS computer system. So for a check to be issued the week of June 12th, a return needs to be in the system six weeks earlier, or by the week of May 1st. Now, I am making assumptions based on my knowledge of how the IRS works but I believe them to be accurate.

What this means is that now is the time to file tax returns if you want your stimulus payment. The IRS saying the sooner the better is correct.

Why “Get My Payment” Doesn’t Work for 2018 Filers who Owed Tax and Haven’t Filed 2019 Returns

Thursday, April 16th, 2020

UPDATE: The IRS updated the app; as of April 24th, the app now works for most 2018 filers. See my new post.

So let’s say your income was low enough in 2018 so you qualify for a Recovery Rebate/Economic Impact (aka stimulus) payment. You go to the IRS’s “Get My Payment” app, enter the information, and see the message:

According to information that we have on file, we cannot determine your eligibility for a payment at this time.

You want to enter your banking information to get a direct deposit. It turns out that you have two options: Receive a paper check during the next few weeks (to months), or file your 2019 tax return. The IRS added the following message regarding 2018 filers:

2018 Filers: If you need to change your account information or mailing address, file your 2019 taxes electronically as soon as possible. That is the only way to let us know your new information. [emphasis added]

So if you are an individual who will qualify based on 2018 or 2019, file 2019. If you’re an individual who will not qualify based on 2019 but do qualify based on 2018, you cannot enter banking information in the “Get My Payment” app. You’re stuck receiving a paper check sometime (unless the IRS updates the app).

Additionally, if you moved you should contact the IRS when they reopen to provide your new mailing address. I would suggest a phone call given that it will take weeks to months for the IRS to process paper change-of-address forms. I also strongly suggest maintaining a forwarding order with the Postal Service.

I would hope the IRS would change their app so that individuals like me who cannot file for months (I’m waiting on a K-1 that usually shows up in late July or early August) could enter their banking information. Unfortunately, it looks like I’ll get a paper check this summer.

“Get My Payment” Is Up, But…

Wednesday, April 15th, 2020

The IRS’s new app, “Get My Payment,” is now active. In theory, if you use this app you can update your banking information and check to see when your Recovery Rebate payment will be made. If you need to add or correct direct deposit information, this is where to do so.

But the app had no information for me. I filed my 2018 return timely (I have not yet filed 2019 as I’m waiting on a K-1), and the app returned, “According to information that we have on file, we cannot determine your eligibility for a payment at this time.” That doesn’t make sense as we qualify based on 2018.

I suspect the issue is that the IRS is, for now, just going through 2019 returns that have been filed and have not yet looked at 2018 returns. This means that those individuals who filed 2018 but not 2019 are looking at having to go back to this website multiple times and/or waiting on IRS guidance on this issue. (The app did work for someone in our office who filed his 2019 return.)

UPDATE #1: The app doesn’t work for some 2019 filers who filed early. It does work for a few who have filed 2018 but not 2019. There appears to be no rhyme or reason for the errors, nor is there an FAQ on this. Basically, the app is great for those who can use it, but it’s causing more questions than answers.

The IRS needs to explain ASAP who can use the app and get information, or when the app will be complete. A bad app is worse than no app.

April 15th Deadlines

Tuesday, April 14th, 2020

Yes, the tax deadline for the IRS (and federal estimated payments for the first two quarters) is July 15th. However, not all states conformed to this–especially for estimated payments. The following states all have first quarter estimated payments for individuals that are due tomorrow, April 15th:

  • Arkansas
  • District of Columbia
  • Hawaii (due April 20th)
  • Illinois
  • Iowa (due April 30th)
  • Kentucky
  • Michigan
  • Minnesota
  • New Hampshire
  • New Jersey
  • North Carolina
  • Oregon

So if you need to make estimated payments for 2020 for one of these states, do so. If you are mailing your payment, use certified mail (but not return receipt requested–there’s a possiblity no one is there to pick up the mail).

On Stimulus Payments and Tax Deadlines

Monday, April 13th, 2020

One of my clients emailed me this morning that they received (via direct deposit) their “Recovery Rebate” (aka stimulus) payment. So the IRS is distributing those. The IRS promises a tool on Friday to check your payment and for individuals who do not have direct deposit to input your banking information. Kudos to the IRS for moving this fast.

I have updated my return deadline information for individuals. The excel version is here; the pdf is here. This update includes the change to federal second quarter estimated payments (now due on July 15th). I also noted that Virginia did not extend its deadline (it remains May 1st); they only extended the deadline to pay (to June 1st).

IRS Extends More Deadlines

Thursday, April 9th, 2020

The IRS released Notice 2020-23 this afternoon, formally extending lots more tax deadlines. I’m going to copy the language as it matters:

The Secretary of the Treasury has determined that any person (as defined in section 7701(a)(1) of the Code) with a Federal tax payment obligation specified in this section III.A (Specified Payment), or a Federal tax return or other form filing obligation specified in this section III.A (Specified Form), which is due to be performed (originally or pursuant to a valid extension) on or after April 1, 2020, and before July 15, 2020,is affected by the COVID-19 emergency for purposes of the relief described in this section III (Affected Taxpayer).

The IRS extends various deadlines/payment dates to July 15th:

  • Form 1040 Series
  • Forms 1040-ES (and other estimated taxes) [1]
  • Forms 1120 Series (including Form 1120-S) [2]
  • Form 1065 [2]
  • Form 1041 Series
  • Form 706
  • Form 709
  • Form 990-T
  • Form 990-PF
  • Form 3520

However, some tax forms were not included: Form 990, Form 990N, and Form 990-EZ. I’m not sure what the reason was for excluding the forms that most nonprofits have to file.

A couple of notes:

  1. The language in this notice appears to extend all estimated payments due between April 1st and July 15th to July 15th. That means that second quarter estimated payments that were due on June 15th are now due on July 15th.
  2. The notice states that relief is granted to: “Calendar year or fiscal year corporate income tax payments and return filings on…[Form] 1120-S…[and] Calendar year or fiscal year partnership return filings on Form 1065, U.S. Return of Partnership Income….” This means that the March 15th deadline for S-Corporations and Partnership returns has been retroactively extended to July 15th–at least, that’s how I read the notice. That’s big news as I have some new clients who just submitted their partnership information, so they’ll be considered timely filed.
  3. The IRS specifically granted relief for anyone who has to file items such as Forms 3520, 5471, 5472, 8921, 8858, 8865, and 8938 with their tax returns. They can either file by July 15th or with a timely (by July 15th) extension.

Kudos to the IRS for this relief–especially the July 15th second quarter estimated tax deadline. Clients were already very confused regarding the idea that the second quarter estimated payment was due before the first quarter payment.

Can a Professional Gambler Apply for a PPP or EIDL Loan?

Tuesday, April 7th, 2020

The CARE Act added Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) for businesses to recover from the COVID-19 pandemic. A question many of our clients have asked is, “I’m a professional gambler. Can I apply for one of these loans?” The answer is no.

It’s not as if a professional gambler can gamble in most locations today (casinos are closed everywhere, though those residing in states with online gambling can partake), so professional gamblers are being impacted. The problem is a regulation adopted in 1996. From 13 CFR § 120.110 (What businesses are inelgible for SBA business loans?). 13 CFR § 120.110(g) states:

Businesses deriving more than one-third of gross annual revenue from legal gambling activities.

(All illegal activities are ineligible per 13 CFR § 120.110(h).)

The American Gaming Association wants this changed; it also prevents small casinos, such as those in South Dakota, from applying for these loans. But changing a federal regulation takes time. The change must be published in the Federal Register, comments must be taken, etc. It’s a near certainty that the COVID-19 emergency will be long past when the regulation is changed (and that assumes the SBA decides to make a change).

Is this fair? No. But it’s reality.