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Tax Pros Debate Later Filing Season Opening — And Closing

Posted on Jan. 19, 2021

Tax professionals slammed the IRS’s announcement of a February 12 opening for the 2021 return filing season, but were split on asking for an extension of the filing deadline.

“After coming off of the most difficult year in memory, including assisting clients with [Paycheck Protection Program] loan forgiveness applications, a new round of legislation at the end of the year, and heading right into another season with little relief, CPAs are now looking at immediate disruption,” Edward Karl, American Institute of CPAs vice president of taxation, told Tax Notes.

In a January 15 release (IR-2021-16), the IRS announced the opening date of a 62-day filing season. In a separate release (IR-2021-15), the agency said the Free File Alliance of return preparation software providers is now available to taxpayers or families with 2020 adjusted gross income of $72,000 or less.

The IRS said it needs more time to program and test systems following tax law changes in the fiscal 2021 budget bill, signed December 27, 2020, by President Trump, including a second round of COVID-19 pandemic economic impact payments (EIPs).

“This start date will ensure that people get their needed tax refunds quickly while also making sure they receive any remaining stimulus payments they are eligible for as quickly as possible,” IRS Commissioner Charles Rettig said in the release.

The IRS said it expects to begin delivering refundable credit payments for earned income tax credit and additional child tax credit direct deposit e-filers by the first week of March.

The 2021 filing season deadline remains April 15.

Best-Laid Plans

House Ways and Means Committee Chair Richard E. Neal, D-Mass., sounded a sympathetic note for the plight of the tax agency.

“While I am disappointed that this year’s filing season will begin later than usual, I recognize that the IRS has faced extraordinary challenges throughout the COVID crisis,” Neal said in a January 15 statement. 

Tax practitioners were not placated.

“It’s tough in a regular season,” said Stephen F. Mankowski of the National Conference of CPA Practitioners. “Except we now have just over 60 days [to file], so there’s not a lot of time.”

Taxpayers will be inconvenienced by the new deadline, practitioners told Tax Notes. Less-complicated individual and business tax returns, usually filed in early January through mid-February, will be delayed for weeks — as will refunds needed by taxpayers hit hard by the pandemic — while tax professionals still reeling from the 2020 filing season may be swamped.

Enrolled agent Joel Grandon of Joel Grandon Accounting Services PC said he fears that identity thieves will use the delay to ply their trade, resulting in more rejected returns and additional work for his staff to resolve stolen identity refund fraud claims.

Karl said the AICPA will monitor filing season developments daily in deciding whether to ask for a deadline extension.

Kathy Hettick of Hettick Accounting & Tax LLC said she won't hesitate to ask for a filing extension. “We are on work overload,” she said.

“It’s ridiculous to cut three weeks off of the filing season and expect good results without adding it on the other end and delay the due date,” said Hettick, a former co-chair of the IRS Advisory Council. “We simply need more time to provide thorough and timely tax returns to our clients.”

Biggest Unknown

The IRS processed more than 162 million individual tax returns — including returns sent by nonfilers to get EIPs last year — as of November 20, 2020, the last date for which information is available.

“Personally, I think it is perfectly reasonable for the IRS to take their time and get it right, but the pandemic has placed a real burden on a lot of families,” said Jeffery S. Trinca, legislative counsel for the National Association of Enrolled Agents. “I really hope this delay does not end up slipping any.”

But the association's members are split between those who want to give the IRS more time to get the filing season right and those who “hate it because it makes for a never-ending filing season,” Trinca said.

“This is going to be an absolutely massive compression of [the] tax season,” Mankowski said. Software providers and return preparers are already preparing returns, which will pile up in email outboxes and mail drops until the IRS begins accepting and processing them on February 12, he said.

“The amount of data that will be sent over to the IRS will be significantly larger” than the usual late-January start, Mankowski said.

The 2021 filing season may be further complicated by the IRS’s simultaneous distribution of additional EIPs, tax credit changes in an expected pandemic relief bill from the incoming Biden administration, and lingering refund backlogs from 2020, Mankowski said.

And that’s not accounting for the operational impacts of another potential COVID-19 outbreak at a key IRS service center, Mankowski said. “The biggest unknown is the pandemic,” he noted.

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