Friday, March 5, 2021

PRESSURE GROWS TO EXTEND THE 2020 FILING DEADLINE WHILE IRS STRUGGLES TO COMPLETE ITS WORK ON 2019

In a letter to the Commissioner and Treasury dated March 4, 2021, the prestigious AICPA has urged the government to move the upcoming filing date of April 15, 2021, back two months to June 15.

The reasons for the requested extension are compelling:


·        Many IRS forms are still not available for electronic filing which has also caused a state delay in releasing forms.

·        A second round of Paycheck Protection Program (PPP) loans that required a significant amount of assistance to small business clients…. Tax professionals continue to assist clients with the PPP first draw loan forgiveness process.

·        Changes to the Employee Retention Credit (ERC), which required possible amendment of 2020 payroll tax returns prior to filing 2020 income tax returns, so that the gross income accurately reflects the ERC amount.

·        A delayed processing by the IRS of 2019 returns that resulted in a rash of erroneous notices.

·        Effects on IRS’s staffing, due to the Coronavirus, that affects its ability to respond to questions and notices and generally to provide taxpayer assistance.

Additionally, there is still confusion in understanding why some taxpayers are eligible or not to receive a stimulus payment or if it is taxable.

The current tax journals and group forums are filled with stories about the IRS’ failure to finish up its work for 2019.

The tax magazine CPA Practice Advisor tells us,

The COVID-19 pandemic turned the tax season upside down last year, and even now millions of people are still dealing with the aftermath in 2021. The Internal Revenue Service said in mid-February that it had yet to process 6.7 million individual income tax returns for 2019, based on data through Jan. 30.

Getting those returns processed — and any refunds involved in hand — may require additional review, dealing with corrections and addressing some ID theft-related problems where the IRS will need to work with taxpayers, according to the IRS.

Most 2019 federal income tax returns have been processed. But the lingering problems are significant, enough that the House Ways and Means Committee is asking the IRS for answers and calling for the IRS to extend the tax return deadline for 2020 tax returns beyond April 15.

In response to the growing public outcry about extending the filing date, the IRS could easily take the position that those people who can’t get their returns prepared before April 15, should simply file timely for an extension to October 15. But that does not address the problem of unavailable forms and a lack of staffing to respond to questions and notices and generally provide taxpayer assistance.

Another good reason to extend the filing date is concern over the amount time it will take to advertise, hire,  train, and integrate thousands of newly-anticipated personnel which is now part of the Covid relief plan currently under consideration by the Senate.

Add to this mix,  the multitude of new roles the IRS is expected to play in the actual physical distribution of relief checks and the implementation of  the new relief plan which is certain  to take the IRS away from its normal focus of assessing and collecting taxes.

A move of the filing date to June 15 is probably a good idea. The IRS may not be able to catch its breath before June 15, but the stakes have never been higher as the country seeks to recover from the pandemic.