From joyfully announcing a client's tax windfall to feelings of futility about COVID-19 controls, tax practitioners shared the highs and lows of a filing season during which April 15 is just another day.
“This has turned into a very stressful season with the . . . delays and unknowns” generated by late tax changes in the American Rescue Plan Act of 2021 (P.L. 117-2) and other coronavirus emergency legislation, said enrolled agent Twila Midwood of Advanced Tax Centre Inc. in Florida.
“Perhaps the worst season ever,” Midwood said about the 2021 filing season. “Even worse than last year, with so many bills passed,” she added.
This is the second year that April 15 passed without fanfare, and the second year in which the COVID-19 pandemic has tied tax professionals and their clients in knots. Tax professionals have found some unique concerns and rewards from the experience.
While the individual tax return filing deadline has been postponed until May 17, tax professionals noted that April 15 is still an important deadline. “There are going to be a lot of late-payment penalties coming” because of the IRS’s refusal to extend the quarterly estimated tax payments deadline, said Kathy Morgan, owner of Puzzled By Taxes in Louisiana. Tax pros have found the need to use outdated returns to estimate clients’ quarterly tax payments, she said.
Frank Agostino of Agostino & Associates PC in New Jersey said pandemic-related IRS backlogs, along with a flood of taxpayer questions, “resulted in a realization that [low-income taxpayer representatives] were powerless to help. There was no lawsuit I could file to open [IRS] service centers, get payments processed or solved. . . . The newspaper stories about unopened mail don’t get the mail opened any faster.”
Not Helping
Notwithstanding professions of good intent, the IRS and Congress have complicated practitioners’ 2021 filing season, tax professionals told Tax Notes.
Enrolled agent James R. Adelman of Tax & Financial Services LLP in Oklahoma said one low point has been explaining why taxpayers in a federally declared disaster zone, told by the IRS that their filing deadlines would be extended to June 15, are now getting late notices.
“Having to explain the IRS is wrong, and having to write to the IRS in each instance, is difficult at best,” Adelman said. “Plus taking time out of my already busy day to respond to something I cannot get paid for is frustrating.”
Midwood said the changes to advance premium tax credits (APTCs) and the treatment of unemployment insurance created more stress for taxpayers confused about IRS instructions, and more work for tax pros digesting new laws and awaiting software updates.
Morgan said Congress’s tax changes and the IRS’s delay in announcing the filing season deadline postponement have caused tax professionals to doubt the agency’s assurances on automated refunds of tax on unemployment income and APTCs.
“No one I know of has any confidence in the IRS’s ability to ‘make the changes themselves,'” on unemployment and APTC returns already filed that return preparers are being told not to amend, Morgan said.
Confusion over these provisions “will be haunting taxpayers and tax pros for years, as the IRS automated letter system throws out millions of erroneous letters again, causing panic among the taxpayers,” Morgan said. “That is the one [issue] that impacted the greatest number of taxpayers and tax pros.”
On the other hand, the June 15 deadline filing extension for both individuals and business returns, following the February ice storm, has an upside for some. “While we expect some letters because of the IRS computer system not catching [the deadline extension], our folks with business returns who had not filed yet are in a good place,” Morgan said.
Best Yet to Come?
Of course, as the saying goes, every filing season cloud has a silver lining.
“Actually, this has not been a terrible season for me,” said enrolled agent Frank Degen in New York. “The absolute best moment was getting my two Pfizer [COVID-19 vaccine] shots.”
Degen said his 2021 filing season cloud was the lack of in-person meetings because of coronavirus restrictions, resulting in a “huge majority” of clients mailing their tax information at the same time.
The silver lining was the client payments that accompanied every request for authorization to e-file, Degen said. “The proverbial check in the mail is really there,” he said.
Adelman said being able to tell clients that up to $10,200 of their unemployment income is not taxable is “a great feeling, because the clients are happy about something.”
Agostino said taxpayers getting economic relief checks when they needed them most gave him “extreme joy.”
And despite the IRS’s mail or processing backlogs, Agostino said that “most everyone I deal with at the IRS wants to help. At least once a week I have one of those moments where I feel we have all come together to make a low-income taxpayer’s life a little better.”