An Update on the 2021 Filing Season
We understand that we are not alone in saying the Coronavirus pandemic has changed much about the way we work. For your continued trust in the face of those changes, we are grateful.
An Update on the 2021 Filing Season
We are writing this letter because even as the news related to the pandemic grows more optimistic overall, it continues to make tax filing season rather messy. In order to set reasonable expectations and to help you avoid frustration, we want to update you on where things stand.
One year ago, the IRS postponed the 2019 income tax filing deadline by three months in response to the pandemic. By that time, the Families First Coronavirus Response Act and the CARES Act (two huge pieces of virus-response legislation) had established the Paycheck Protection Program (PPP) and a multitude of payroll tax credits and grants for small businesses who were impacted by the virus. Those bills also created numerous other significant changes to the tax code. The additional time supplied by the postponed deadline was critical to our ability to meet your needs. We helped hundreds of clients secure millions of dollars in PPP funding that helped keep our local businesses alive, and we were able to prepare tax returns with a full and accurate understanding of the law, even though so much of it was new. The additional time was 100% necessary.
Today, our situation is largely the same as it has been for the last year, but the length of our filing season is not. The IRS is still sitting on millions of unprocessed 2019 tax returns and has sent millions of incorrect tax notices. Only about 1 in 4 calls to the IRS is answered. We are in the midst of another PPP application window, with new rules being released as recently as March 19th. The Employee Retention Tax Credit was recently extended through the end of 2021 and requires careful consideration and calculation in order to further assist our local businesses. For individual tax returns, we must perform an assessment of Economic Impact Payments received or not received, in order to ensure that every taxpayer receives the stimulus he or she is entitled to.
On March 11th, President Biden signed the American Rescue Plan Act, which set the stage for many Americans to receive a third Economic Impact Payment. This bill also retroactively changed the 2020 tax law, even though about 50 million returns had already been filed. Among the changes is a provision that makes $10,200 of unemployment benefits non-taxable for certain taxpayers, many of whom have already filed their return and overpaid their tax, and now must wait for guidance on how to correct it.
On March 17th, the IRS announced that it had moved the deadline for individual tax returns to May 17th rather than April 15th. This change, however, does not provide full relief for those who pay quarterly estimated taxes; it also does not move the April 15th deadline for IRA or HSA contributions. The deadlines for corporations and trusts were not moved. We are currently awaiting word from individual states as to whether they will move their deadlines (Missouri mirrored the IRS changes on March 18th). This year's filing extension provided by the IRS is largely insignificant in terms of the actual breathing room it provides related to the issues described above.
The House Ways and Means Committee, the American Institute of Certified Public Accountants, the Government Accountability Office, and the AARP had all previously encouraged the IRS to move the deadline in a similar manner to last year, but the IRS has not listened to those requests.
We feel it’s important that you understand this information, because without additional action from the IRS related to the deadline, we will require more time to prepare accurate income tax returns for our clients this year. Even in normal years, it can be difficult to balance quality work and timely service in a condensed filing season – but this year it is certainly not in the best interests of the American taxpayer (specifically you, our client) to create undue deadline pressure as we deal with a tax-filing environment that continues to change, even in late March.
We value your trust and we understand that stretching out the preparation of your tax return may be an inconvenience. We would not ask if it were not necessary. We also appreciate your patience and grace, and we look forward to a filing season when they are not required in such large quantities.
Thank you for understanding that the factors leading to these delays are outside of our control. We want our clients to enjoy a stress-free tax filing and wish these circumstances were different. We will continue to do everything we can to provide you with reliable service and a positive experience.
Wilson Toellner CPA
Last Revised: March 19, 2021