Tax professionals appear to be coming around to the idea that — like it or not — the IRS should extend the April 15 individual return filing deadline, and perhaps other deadlines as well.
The American Institute of CPAs has about 200,000 practicing members, estimated AICPA Vice President of Taxation Edward S. Karl, “but there are probably 200,000 different opinions on what we should do” about the combined stress of a compressed filing season, potential new rounds of coronavirus economic impact payments (EIPs), and the COVID-19 pandemic that casts a shadow over it all.
The IRS postponed its usual late-January filing season opening until February 12, the agency announced January 15. That leaves 62 days — instead of the usual 70-plus days — for it to receive almost 150 million individual returns and process more than $276 billion, as it did through the extended July 15, 2020, filing season.
IRS Commissioner Charles Rettig also said January 21 that further rounds of EIPs could require additional programming changes that might affect the April 15 deadline, although he didn’t elaborate.
The 2021 filing season has already started for some, tax professionals noted. Farmers and fishermen had to pay 2020 estimated taxes by January 15, while S corporations and partnerships need to file returns by March 15, noted Kathy R. Hettick of Hettick Accounting &Tax LLC.
Rhonda Collins, director of government relations for the National Association of Tax Professionals, said many of her association members want to retain the April 15 deadline. “It truly feels like tax season hasn’t ended for two years,” and they want finality, she said.
However, Collins added, “We will never be able to get everything done by April 15.” Members confronting the constricted 2021 tax season increasingly agree that “even though they want to keep April 15, it’s not realistic,” she said.
Hettick has no doubt which side she’s on. “We just simply have too many unknowns, especially for businesses, and too much work to be done to prepare accurate returns for these [regular] due dates,” she said. “Why is the IRS waiting to delay the due dates?”
Too Much Work, Not Enough Time
The IRS said the agency’s February 12 start date was necessitated by computer programming changes to accommodate late tax law changes and the second round of EIPs.
“Many who support an extension fear that there are too many challenges and uncertainties, including a lack of [employee retention credit] guidance, for example, for a shortened tax season to fare well,” said Jessica Jeane, director of public policy at the National Society of Accountants.
“However, many others are fearful of another seemingly never-ending filing season stretching into next year’s filing season, as last year’s has,” Jeane said.
Tax professionals told Tax Notes that late ERC-related information reporting from third parties and their own clients, along with unanswered IRS questions about the changes in the Consolidated Appropriations Act, 2021 (P.L. 116-260) allowing more businesses to qualify for the ERC, are among their top concerns for the upcoming filing season.
“We need additional guidance on what wages qualify for the ERC,” Hettick said. “There is much division in the industry surrounding the S corp shareholder and whether their wages qualify for the credit.”
Practitioners also need IRS guidance on coordinating Paycheck Protection Program loan forgiveness applications with the ERC, Hettick said. “If wages were stated on the application, but not needed to maximize forgiveness, do those qualify for the ERC?” she asked.
Further complicating the 2021 filing season is confusion over the tax consequences of the second round of EIPs, and the apparently imminent distribution of additional stimulus, said Stephen Mankowski of the National Conference of CPA Practitioners.
“I’m envisioning this becoming an issue . . . with taxpayers not remembering how much was received in either EIP,” Mankowski said. “If the [tax] reconciliation isn’t on the return, will this get pulled for ‘further processing,’” similar to the frustrating and time-consuming resolutions of Affordable Care Act reconciliations with Form 1095-A? he asked.
Getting Emotional
The IRS will soon face a flood of tax returns already electronically filed and awaiting the agency’s February 12 opening date.
Practitioners cited the IRS’s backlog of paper-filed returns, difficulties distributing EIPs to the right people, and perpetual budget squeeze for their concerns about sticking with the April 15 filing deadline.
Mankowski lauded the IRS’s pandemic-related health and safety measures. “The IRS needs to announce an extension sooner rather than later to the filing season,” he said. “Overall, it will work towards keeping everyone just a little safer.”
Nancy Kasten of the National Association of Tax Professionals said the group’s IRS liaison told them there was no news about possibly extending the filing season.
Mankowski said he was glad the 2020 filing season was extended because it let him “work through returns in a safe environment.”
“Those same issues will be with us during this season, too,” he added.
“I get that some tax pros don’t want delayed due dates,” Hettick said. “It was such a long year last year, we never really got a break.” She suggested a May 15 or May 31 deadline for tax returns ordinarily due from March 1 through April 15.
Speaking for herself in the midst of the debate among tax professionals, Collins said of her practice, “We need at least until July 15 to get it all done.”
“Everyone has a valid reason for their position — wanting to delay or not wanting to delay,” Karl told Tax Notes. Practitioner debates on listservs and at conferences have gotten emotional over the deadline issue, he said.
“It’s not a question of whether [deadline arguments] are valid or not,” Karl said. Fifty state tax authorities, not to mention territorial and other tax administrators, will have to conform their own processes and deadlines to the IRS’s eventual decision, he noted. And ultimately, the IRS commissioner will make the call.