Posts Tagged ‘2022.Tax.Season’

Tax Season (For Individuals) to Begin on January 24th

Monday, January 10th, 2022

The IRS announced today that Tax Season will begin on Monday, January 24th.  That’s the first date that electronically filed returns (and extensions) for the 2021 tax year will be accepted for individuals.  (Businesses can already file their 2021 returns.)

Do note that almost every tax professional uses software, and that some forms may not be ready until after that date.  Additionally, some state forms and state returns will not be able to be processed until after January 24th.

You should not file your return until you have all your tax paperwork.  The deadline for brokerage firms to send their 1099s is February 15th (and it is routinely extended).  If you are a partner in a partnership, a shareholder in an S-Corporation, or a beneficiary of a trust, you must wait until you receive your K-1’s.  Remember, it’s better to extend than amend.

Finally, we do not expect the deadline for individual returns to be extended from April 18th.  That means you will need to file (or file an extension) by then.

As for how this year’s Tax Season will go, expect a repeat of last year.  The IRS still has not processed all 2020 returns (but they’re through April!).  Until IRS staff is fully back at their Service Centers, there’s no reason to expect anything to change.  This is not a scenario to make any IRS stakeholder–be it a tax professional, taxpayer, or Congressman–happy.  I can state for the record that I absolutely expect the same issues with delayed processing of refunds this year.  (I have a client whose 2019 return is still stuck in limbo!)

IRS Appears to Add Requirement for Individuals to Include Statement on PPP Loan Forgiveness for 2021 Personal Returns

Monday, December 6th, 2021

On Friday, the IRS released draft instructions for Form 1040.  Buried on page 23 of the instructions (page 24 of the PDF) is the following:

Forgiveness of Paycheck Protection Program (PPP) Loans

The forgiveness of a PPP Loan creates tax-exempt income, so although you don’t need to report the income from the forgiveness of your PPP Loan on Form 1040 or 1040-SR, you do need to report certain information related to your PPP Loan.

Rev. Proc. 2021-48, 2021-49 I.R.B. 835, permits taxpayers to treat tax-exempt income resulting from the forgiveness of a PPP Loan as received or accrued: (1) as, and to the extent that, eligible expenses are paid or incurred; (2) when you apply for forgiveness of the PPP Loan; or (3) when forgiveness of the PPP Loan is granted. If you have tax-exempt income resulting from the forgiveness of a PPP Loan, attach a statement to your return reporting each taxable year for which you are applying Rev. Proc. 2021-48, and which section of Rev. Proc. 2021-48 you are applying—either section 3.01(1), (2), or (3). Any statement should include the following information for each PPP Loan:

1. Your name, address, and ITIN or SSN;
2.
A statement that you are applying or applied section 3.01(1), (2), or (3) of Rev. Proc. 2021-48, and for what taxable year (2020 or 2021) as applicable;
3.
The amount of tax-exempt income from forgiveness of the PPP Loan that you are treating as received or accrued and for what taxable year (2020 or 2021); and
4.
Whether forgiveness of the PPP Loan has been granted as of the date you file your return.

Write “RP2021-48” at the top of your attached statement.

As I read the instructions, this applies for any PPP loan for a sole proprietorship (Schedule C business) where there is PPP loan forgiveness in either 2020 or 2021.  So this includes people who had the loan forgiven last year!

As the IRS states, “The forgiveness of a PPP Loan creates tax-exempt income, so…you don’t need to report the income from the forgiveness of your PPP Loan on Form 1040 or 1040-SR….”  While Rev. Proc. 2021-48 states, “The IRS will publish form instructions for the 2021 filing season that will detail how taxpayers can report consistently with sections 3.01 through 3.03 of this revenue procedure,” wouldn’t the easiest and simplest method be that taxpayers must retain records of their forgiveness of their PPP loans and supply them to the IRS upon request?  Instead, we get more “make work” for tax professionals (and taxpayers) for 2021 tax returns.  It adds time to return preparation without giving IMHO the IRS any real benefit.