2022 tax filing season begins Jan. 24

2022 tax filing season begins Jan. 24; IRS outlines refund timing and what to expect in advance of April 18 tax deadline

IR-2022-08, January 10, 2022

WASHINGTON — The Internal Revenue Service announced that the nation’s tax season will start on Monday, January 24, 2022, when the tax agency will begin accepting and processing 2021 tax year returns.

The January 24 start date for individual tax return filers allows the IRS time to perform programming and testing that is critical to ensuring IRS systems run smoothly. Updated programming helps ensure that eligible people can claim the proper amount of the Child Tax Credit after comparing their 2021 advance credits and claim any remaining stimulus money as a Recovery Rebate Credit when they file their 2021 tax return.

“Planning for the nation’s filing season process is a massive undertaking, and IRS teams have been working non-stop these past several months to prepare,” said IRS Commissioner Chuck Rettig. “The pandemic continues to create challenges, but the IRS reminds people there are important steps they can take to help ensure their tax return and refund don’t face processing delays. Filing electronically with direct deposit and avoiding a paper tax return is more important than ever this year. And we urge extra attention to those who received an Economic Impact Payment or an advance Child Tax Credit last year. People should make sure they report the correct amount on their tax return to avoid delays.”

The IRS encourages everyone to have all the information they need in hand to make sure they file a complete and accurate return. Having an accurate tax return can avoid processing delays, refund delays and later IRS notices. This is especially important for people who received advance Child Tax Credit payments or Economic Impact Payments (American Rescue Plan stimulus payments) in 2021; they will need the amounts of these payments when preparing their tax return. The IRS is mailing special letters to recipients, and they can also check amounts received on IRS.gov.

Like last year, there will be individuals filing tax returns who, even though they are not required to file, need to file a 2021 return to claim a Recovery Rebate Credit to receive the tax credit from the 2021 stimulus payments or reconcile advance payments of the Child Tax Credit. People who don’t normally file also could receive other credits.

April 18 tax filing deadline for most

The filing deadline to submit 2021 tax returns or an extension to file and pay tax owed is Monday, April 18, 2022, for most taxpayers. By law, Washington, D.C., holidays impact tax deadlines for everyone in the same way federal holidays do. The due date is April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia for everyone except taxpayers who live in Maine or Massachusetts. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots’ Day holiday in those states. Taxpayers requesting an extension will have until Monday, October 17, 2022, to file.

Awaiting processing of previous tax returns? People can still file 2021 returns

Rettig noted that IRS employees continue to work hard on critical areas affected by the pandemic, including processing of tax returns from last year and record levels of phone calls coming in.

“In many areas, we are unable to deliver the amount of service and enforcement that our taxpayers and tax system deserves and needs. This is frustrating for taxpayers, for IRS employees and for me,” Rettig said. “IRS employees want to do more, and we will continue in 2022 to do everything possible with the resources available to us. And we will continue to look for ways to improve. We want to deliver as much as possible while also protecting the health and safety of our employees and taxpayers. Additional resources are essential to helping our employees do more in 2022 – and beyond.”

The IRS continues to reduce the inventory of prior-year individual tax returns that have not been fully processed. As of December 3, 2021, the IRS has processed nearly 169 million tax returns. All paper and electronic individual 2020 refund returns received prior to April 2021 have been processed if the return had no errors or did not require further review.

Taxpayers generally will not need to wait for their 2020 return to be fully processed to file their 2021 tax returns and can file when they are ready.

Key information to help taxpayers

The IRS encourages people to use online resources before calling. Last filing season, as a result of COVID-era tax changes and broader pandemic challenges, the IRS phone systems received more than 145 million calls from January 1 – May 17, more than four times more calls than in an average year. In addition to IRS.gov, the IRS has a variety of other free options available to help taxpayers, ranging from free assistance at Volunteer Income Tax Assistance and Tax Counseling for the Elderly locations across the country to the availability of the IRS Free File program.

“Our phone volumes continue to remain at record-setting levels,” Rettig said. “We urge people to check IRS.gov and establish an online account to help them access information more quickly. We have invested in developing new online capacities to make this a quick and easy way for taxpayers to get the information they need.”

Last year’s average tax refund was more than $2,800. More than 160 million individual tax returns for the 2021 tax year are expected to be filed, with the vast majority of those coming before the traditional April tax deadline.

Overall, the IRS anticipates most taxpayers will receive their refund within 21 days of when they file electronically if they choose direct deposit and there are no issues with their tax return. The IRS urges taxpayers and tax professionals to file electronically. To avoid delays in processing, people should avoid filing paper returns wherever possible.

By law, the IRS cannot issue a refund involving the Earned Income Tax Credit or Additional Child Tax Credit before mid-February, though eligible people may file their returns beginning on January 24. The law provides this additional time to help the IRS stop fraudulent refunds from being issued.

Some returns, filed electronically or on paper, may need manual review, which delays the processing, if our systems detect a possible error or missing information, or there is suspected identity theft or fraud. Some of these situations require us to correspond with taxpayers, but some do not. This work does require special handling by an IRS employee so, in these instances, it may take the IRS more than the normal 21 days to issue any related refund. In those cases where IRS is able to correct the return without corresponding, the IRS will send an explanation to the taxpayer.

File electronically and choose direct deposit

To speed refunds, the IRS urges taxpayers to file electronically with direct deposit information as soon as they have everything they need to file an accurate return. If the return includes errors or is incomplete, it may require further review that may slow the tax refund. Having all information available when preparing the 2021 tax return can reduce errors and avoid delays in processing.

Most individual taxpayers file IRS Form 1040 or Form 1040-SR once they receive Forms W-2 and other earnings information from their employers, issuers like state agencies and payers. The IRS has incorporated recent changes to the tax laws into the forms and instructions and shared the updates with its partners who develop the software used by individuals and tax professionals to prepare and file their returns. Forms 1040 and 1040-SR and the associated instructions are available now on IRS.gov. For the latest IRS forms and instructions, visit the IRS website at IRS.gov/forms.

Free File available January 14

IRS Free File will open January 14 when participating providers will accept completed returns and hold them until they can be filed electronically with the IRS. Many commercial tax preparation software companies and tax professionals will also be accepting and preparing tax returns before January 24 to submit the returns when the IRS systems open.

The IRS strongly encourages people to file their tax returns electronically to minimize errors and for faster refunds – as well having all the information they need to file an accurate return to avoid delays. The IRS’s Free File program allows taxpayers who made $73,000 or less in 2021 to file their taxes electronically for free using software provided by commercial tax filing companies. More information will be available on Free File later this week.

In addition to IRS Free File, the IRS’s Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs free basic tax return preparation to qualified individuals. 

Watch for IRS letters about advance Child Tax Credit payments and third Economic Impact Payments

The IRS started sending Letter 6419, 2021 advance Child Tax Credit, in late December 2021 and continues to do so into January. The letter contains important information that can help ensure the return is accurate. People who received the advance CTC payments can also check the amount of the payments they received by using the CTC Update Portal available on IRS.gov.

Eligible taxpayers who received advance Child Tax Credit payments should file a 2021 tax return to receive the second half of the credit. Eligible taxpayers who did not receive advance Child Tax Credit payments can claim the full credit by filing a tax return.

The IRS will begin issuing Letter 6475, Your Third Economic Impact Payment, to individuals who received a third payment in 2021 in late January. While most eligible people already received their stimulus payments, this letter will help individuals determine if they are eligible to claim the Recovery Rebate Credit for missing stimulus payments. If so, they must file a 2021 tax return to claim their remaining stimulus amount. People can also use IRS online account to view their Economic Impact Payment amounts.

Both letters include important information that can help people file an accurate 2021 tax return. If the return includes errors or is incomplete, it may require further review while the IRS corrects the error, which may slow the tax refund. Using this information when preparing a tax return electronically can reduce errors and avoid delays in processing.

The fastest way for eligible individuals to get their 2021 tax refund that will include their allowable Child Tax Credit and Recovery Rebate Credit is by filing electronically and choosing direct deposit.

Tips to make filing easier

To avoid processing delays and speed refunds, the IRS urges people to follow these steps:

Organize and gather 2021 tax records including Social Security numbers, Individual Taxpayer Identification Numbers, Adoption Taxpayer Identification Numbers, and this year’s Identity Protection Personal Identification Numbers valid for calendar year 2022.

Check IRS.gov for the latest tax information, including the latest on reconciling advance payments of the Child Tax Credit or claiming a Recovery Rebate Credit for missing stimulus payments. There is no need to call.

Set up or log in securely at IRS.gov/account to access personal tax account information including balance, payments, and tax records including adjusted gross income.

Make final estimated tax payments for 2021 by Tuesday, January 18, 2022, to help avoid a tax-time bill and possible penalties.

Individuals can use a bank account, prepaid debit card or mobile app to use direct deposit and will need to provide routing and account numbers. Learn how to open an account at an FDIC-Insured bank or through the National Credit Union Locator Tool.

File a complete and accurate return electronically when ready and choose direct deposit for the quickest refund.

Key filing season dates

There are several important dates taxpayers should keep in mind for this year’s filing season:

  • January 14: IRS Free File opens. Taxpayers can begin filing returns through IRS Free File partners; tax returns will be transmitted to the IRS starting January 24. Tax software companies also are accepting tax filings in advance.
     
  • January 18: Due date for tax year 2021 fourth quarter estimated tax payment.
     
  • January 24: IRS begins 2022 tax season. Individual 2021 tax returns begin being accepted and processing begins
     
  • January 28: Earned Income Tax Credit Awareness Day to raise awareness of valuable tax credits available to many people – including the option to use prior-year income to qualify.
     
  • April 18: Due date to file 2021 tax return or request extension and pay tax owed due to Emancipation Day holiday in Washington, D.C., even for those who live outside the area.
     
  • April 19: Due date to file 2021 tax return or request extension and pay tax owed for those who live in MA or ME due to Patriots’ Day holiday
     
  • October 17: Due date to file for those requesting an extension on their 2021 tax returns

Planning ahead

It’s never too early to get ready for the tax-filing season ahead. For more tips and resources, check out the Get Ready page on IRS.gov.

2021- PTIN FEES ARE BACK

IRS announces 2021 PTIN fees for tax return preparers

IR-2020-159, July 15, 2020

WASHINGTON — The Internal Revenue Service announced today the annual fee for 2021 that tax return preparers must pay to apply for or renew their Preparer Tax Identification Number (PTIN).

In final regulations issued today, the IRS set a $21 fee per PTIN application or renewal (plus a $14.95 fee payable to a contractor).

Anyone who prepares or substantially helps prepare any federal tax return or claim for refund for compensation must have a valid PTIN from the IRS. The PTIN must be used as the identifying number on returns prepared. Failure to have and use a valid PTIN may result in penalties. The IRS estimates that more than 800,000 tax return preparers will apply for or renew a PTIN this year.

The annual renewal of PTINs ensures the IRS has up-to-date identifying information about each return preparer, which is essential for timely communication of important information. The program helps protect both return preparers and taxpayers and prevent the unauthorized use of PTINs.

The IRS is required (PDF) to conduct a biennial review of the PTIN user fee. The agency determined that the full cost to administer the PTIN program going forward is $21 per application or renewal. This amount includes costs relating to PTIN misuse and maintaining the integrity of PTINs. The third-party contractor fee, $14.95, pays for several functions including processing applications, renewals and operating a call center.

PTINs expire on December 31 of the year for which they are issued. PTINs generally can be renewed beginning in mid-October and are valid for the following calendar year. A tax return preparer can renew online at www.irs.gov/ptin by logging into the preparer’s PTIN account or by submitting a paper Form W-12 with the “Renewal” box checked.

2019 Tax Season Opening Day- Jan 27th 2020

Zip Refund is open for yet another tax season and as of today, the IRS announced when they will be, too.

IRS opening date 2020

The Internal Revenue Service confirmed that the nation’s tax season will start for individual tax return filers on Monday, January 27, 2020, when the tax agency will begin accepting and processing 2019 tax year returns.

The deadline to file 2019 tax returns and pay any tax owed is Wednesday, April 15, 2020. More than 150 million individual tax returns for the 2019 tax year are expected to be filed, with the vast majority of those coming before the traditional April tax deadline.

“As we enter the filing season, taxpayers should know that the dedicated workforce of the IRS stands ready to help,” said IRS Commissioner Chuck Rettig. “We encourage taxpayers to plan ahead and use the tools and information available on IRS.gov. The IRS and the nation’s tax community are committed to making this another smooth filing season.”

The IRS set the January 27 opening date to ensure the security and readiness of key tax processing systems and to address the potential impact of recent tax legislation on 2019 tax returns.

We are looking forward to another successful year as continue to prepare for opening day. HUB tetsting will be here before you know it,  so we are more than ready. 

 

IRS Changes The 1040 Again – Wait, WHAT?

irs changes 1040 again

Guess the first time they tried this, they did not succeed and it did not go so well so they are trying again.  Last year a postcard- this year…

The IRS revealed that the 1040 will have several changes for the coming tax season. First, the 1040 is being enlarged to allow more information to be entered vs. being entered on a supporting schedule. The 1040 will be approximately 25% larger. Also, three of the six schedules have been eliminated by combining certain items or moving them back to the 1040.

The first page of the 1040 will now have space for the taxpayer to enter a foreign address, as opposed to it being located on Schedule 6. Certain income items have been relocated to the first page of the 1040, including a line to report Capital gain or (loss). The signature lines for the Primary Filer, Spouse and Paid Preparer are now located at the bottom of the second page of the 1040. Also, Third Party Designee information has been added back to the second page of the 1040.

The layout of the new 1040 and the three remaining schedules are different than last year’s forms. The Standard Deduction section has been expanded, making it easier to identify when a taxpayer is eligible for the additional standard deduction due age or blindness. There is now a spot the taxpayers E‐mail address and phone number in the signature section. The remaining schedules have appropriately been re‐numbered, beginning with 1. Previously, the numbering was confusing and despite their intent, was of little help.

(Schedule 1) ‐ Additional Income and Adjustments to Income have been renumbered but basically remains the same. The only real difference is, alimony now requires the taxpayer to enter the date of the divorce.

(Schedule 2) Is now Additional Taxes. It combines last year’s Schedule 2 – Tax and Schedule 4 – Other Taxes into a single schedule.

(Schedule 3) Is now called Additional Credits and Payments. Schedule 3 now combines— Nonrefundable Credits and Schedule 5—Other Payments and Refundable Credits.

The latest version of the re‐designed Form 1040 and Schedules 1‐3 are posted in the draft forms section on IRS.gov.

2019 Tax Refunds Will Be 26% Higher, Morgan Stanley Says

Odds are you’re paying too high a tax bill today. The good news, though, is that means you could see a notably higher refund next year.

A research note from Morgan Stanley estimates 2019 refunds will top this year’s by 26%, working out to an extra $62 billion given back by the Internal Revenue Service.

Payroll taxes are where people have been overpaying, says the investment firm, as most haven’t changed their withholding. Combine that with the GOP’s tax bill, which was passed last December and it increases the odds of a nice refund.

The bulk of the refunds,says Morgan Stanley, will be sent in February. And that could have some positive effects for the economy.

“We expect this boost in tax refunds to result in a sharply higher savings rate and elevated sales of big-ticket items in February and March 2019,” the firm wrote.

The bulk of people getting refunds—some 65%—tucked them into savings this year, according to a Morgan Stanley survey.Meanwhile, 35% paid down debt and 12% splurged on a vacation, while 8% made a major purchase, such as a car or TV, with the refund.

The average refund as ofthe end of April 2018, according to the IRS, was $2,771, which was just 0.2% bigger than the 2017 totals. (The good news was they were sent out to people quicker this year.)

Better news? Your chances of an IRS tax audit in 2018 are the lowest in 15 years, as the branch has lost close to one-third of its enforcement staff since 2010. That’s not expected to change next year.

From: fortune.com

10 tips for tax pros to avoid phishing scams

10 tips for tax pros to avoid phishing scams

By Jeff Stimpson

Published September 17 2017, 5∶09pm EDT

The inbox seems to have become tax preparers’ worst enemy in this age of phishing e-mails designed to trick preparers into volunteering critical information. Crooks convert stolen data into phony refunds faster than ever, and it’s easy to think that time-tested protections aren’t enough anymore.

The IRS shared its top 10 tips and practical examples for tax pros to protect themselves – and their clients – from taking the bait. (A slideshow version of this article is available.)

 

  1. Spear itself. Nine out of 10 cyber-attacks and data leaks begin with spear phishing e-mail, often tailored to individual practitioners. Spear-phishing crooks pose as familiar entities, and have usually done extensive research to target a specific audience – tax pros are favorites – to gain passwords or install malware.

Red flags: The supposedly familiar source of the e-mail; conversational but ungrammatical and oddly constructed language; calls to action urging opening of a link (often a “tiny” URL to mask the true destination).

 

  1. Hostile takeovers. In these mushrooming schemes, a thief manages to steal or guess the username and password of a tax pro, resulting in the imaginable and horrific havoc with EFINs, prep software accounts and more. Again, these hardworking thieves do their homework to pose as a familiar organization, potential client, another tax pro, a bank or a cloud-based storage provider. Links or attachments may also load malware on computers to capture keystrokes.

Red flags: Urgent and threatening calls to action; pages that looks like the login pages for IRS e-Services or a prep-software providers.

 

  1. Day at the breach. In the first five months of this year, about 107,000 taxpayers reported being victims of ID theft — a total actually down from previous years — but the IRS also saw an jump in ID theft involving business-related tax returns, including 1120s and 1120Ss, 1041s and Schedule K-1 filings. The IRS will soon ask tax pros to gather more information on their business clients to help authenticate returns, including Social Security numbers, payment history and parent company information.

Red flag: Potential business clients claiming they don’t currently have an EIN.

 

  1. Ransom devil. Ransomware attacks are on the rise worldwide, locking computer systems and holding sensitive data hostage until users pay crooks to release the data (though often scammers won’t provide the decryption key even after a ransom is paid). Users generally are unaware that malware has infected their systems until they receive the ransom request.

Red flag: Phishing e-mails.

 

  1. Remote control. A tax pro’s entire digital network could be at risk for remote takeover by cybercriminals who exploit security weaknesses to access the devices to access client returns, complete and e-file those returns, and then secretly direct refunds to their own accounts. Especially vulnerable are wireless networks, including mobile phones, modems and router devices, printers (clients’ returns might still in the device’s memory), fax machines and televisions that retain their factory issued password settings.

Red flags: Phishing e-mails with attachments.

 

  1. BEC to the wall. A burgeoning W-2 scam — a.k.a., a business email compromise, or “BEC”– is one of the most dangerous phishing e-mail schemes trending nationwide. A cybercriminal impersonates a company or organization exec’s e-mail address to target a payroll, financial or HR employee with a request for a transfer or funds or a request a list of all employees and their W-2s. This allows crooks to file fraudulent returns that mirror the employees’ actual income, making the fraud harder to detect.

Red flags: Slight variations in familiar URLs (for example, legitimate abc_company.com e-mail domain reads as “abccompany. com”); “reply” e-mail address is different from the “from” e-mail address.

 

  1. EFIN headache. Criminal syndicates routinely attempt to steal tax pros’ usernames and passwords to access e-Services to obtain the EFIN. Savvy cybercriminals even swipe CAF numbers and may know how to file fraudulent power-of-attorney documents. (Password thefts are one reason the IRS moved to a two-factor authentication process for online tools.)

Red flags: Spear-phishing e-mails impersonating IRS e-services.

 

  1. Protect clients. Tax pros must take proactive responsibility for safeguarding client data. Proper plans assess risks to taxpayer information in offices, list locations where taxpayer information is kept, and formally document how to safeguard information.

Red flags: Service providers lacking an adequate level of information protection.

 

Click below to Read more

First Time Abate

First Time Abate: The ‘Get Out of Tax Penalties Free’ Card

JULY 13, 2016
BY PAUL L. MANCINONE AND ALISON WALSH
paulmancinone
alison-walsh2

Most tax practitioners occasionally find themselves in the position of having to deal with clients who have received penalties for late filing of tax returns or late payment of income taxes.

As both a CPA and attorney, our office always has penalty abatement requests in process. Most penalty provisions of the Internal Revenue Code have reasonable cause language, so the penalty can at least be addressed with a good reasonable cause argument, assuming one exists. Those penalties involving “intentional” or “willful disregard” language, with considerably higher dollars at stake, tend to involve a more extensive plan of attack.

It’s safe to say most taxpayers who tend to heed the advice of quality preparers don’t find themselves in penalty situations very often. But wouldn’t it be great if there was a simple streamlined tool to abate penalties for otherwise diligent and responsible taxpayers? Well there is, and it’s been around since 2001! It’s an administrative waiver called “First Time Abate.”

A while ago, we wrote about Form 8275, Disclosure Memo, as a safety tool to avoid penalties by disclosing a position on a tax return for which the preparer and taxpayer believe they have reasonable basis, but are nonetheless not quite sure (see IRS Penalties: Speak Softly and Carry Form 8275). We were, and continue to be, astonished by the lack of use of this most valuable resource. First Time Abate is another penalty tool that we are surprised hasn’t yet become mainstream in tax practice.

In 2001, the Internal Revenue Service began granting penalty relief under an administrative waiver known as First Time Penalty Abate. It’s not in the Internal Revenue Code; it comes under the “Reasonable Cause Assistant” (RCA) of the IRS and it’s in the Internal Revenue Manual (IRM 20.1.1.3.6.1). Like many provisions of the Internal Revenue Manual (repetitive examination procedures, for example), First Time Penalty Abate availability is not well publicized by the IRS.

Here’s how it works. The IRM basically states that First Time Abate applies to penalties for late income tax filings (including partnerships and S corporations) and late income tax payments (including late deposits of tax). Such abatement may be granted as long as the taxpayer has a clean history (no penalty assessments) for the previous three years. The purpose behind First Time Abate relief is to reward past compliance and promote future compliance by utilization of this “get out of penalty free card.”

A clean history means a clean history, but some areas of the Internal Revenue Manual or other research are worthy of note. For example, the criteria includes “if current taxes are paid, or arranged to pay.” Well, “arranged to pay” means the IRS will consider the taxpayer current if an installment agreement is in existence, as long as the payment plan is in good standing. Thus, an installment agreement in good standing does not negate the possibility of relief under the First Time Penalty Abate administrative waiver. In addition, if there was a prior penalty in the previous three years, but it was removed due to reasonable cause, that activity should not count as a “prior penalty.” Thus the opportunity to be awarded this first time abatement is still applicable in that situation.

Our office simply requests this waiver by responding to the address on the penalty assessment letter, stating the taxpayer’s “good three year history” and a request that the “penalty be waived under First Time Penalty Abate Administrative Waiver.” Frankly, we try it with a whole variety of penalties, not just late filing and late payment of income tax returns, since First Time Abate is not quite “the law” and clearly discretionary. In addition, if one of the prior three years had an insignificant penalty, there is language in the IRM that suggests consideration, so we’d try in that case too, especially if we lack reasonable cause. Try.

In 2012, the Treasury Inspector General for Tax Administration pointed out that the IRS failed to inform about 1.45 million taxpayers that they qualified for this relief, resulting in $181 million in waivable penalties. TIGTA recommended the IRS ensure taxpayers are aware of this potential waiver. However, from what we see, this has not been the case. Most practitioners, as well as the vast majority of taxpayers, are not familiar with this most welcome opportunity.

Paul Mancinone is a CPA and attorney at law, and represents businesses and individuals before the IRS. Alison Walsh is an accountant and manager at his firm, Paul Mancinone Company, P.C., in Springfield, Mass.

 

 

Comments (3)

I know exactly what you mean tcalverley – I have had the same problem with the IRS giving us the “Congratulations – we have waived the penalty based only on your clean compliance history” when I have clearly explained that the small $60 (or whatever) penalty they have assessed was in error. They don’t listen and who wants to spend any more time on a small penalty like that – but if within three years from that, the taxpayer (for whatever reason) ends up with a large penalty, you better believe I’m going to fight tooth and nail to get First Time Abate for THAT penalty since they never should have issued the first penalty to begin with. So far we haven’t had to deal with this yet (i.e., we haven’t had the IRS erroneously use FTA for a penalty that THEY issued in error and then have another more substantial penalty within three year years that we needed to get them out of).

Also – by the way, I have had IRS agents/assistors tell me on the phone that when it comes to PAYMENTS they don’t have to use the postmark date. I know of taxpayers who have mailed their payments on the due date only to be smacked with interest and a penalty for filing late and when I called to say they were wrong because they mailed it on the due date, they said nope – they don’t have to go by the mailbox rule when it comes to payments.

Posted by CLEEA | Friday, July 15 2016 at 9:17AM ET
We have had several cases of taxpayers assessed penalty because of IRS errors in posting payments using the postmark date rather than received date as the payment date. We write to the IRS to explain the mailbox rule and ask that they correct the posting date. The IRS replies with a waiver based on the taxpayer’s “clean history” thereby using the first time abate when it is not appropriate. To date, it has been futile trying to convince the IRS that the taxpayer did not intend to use the first time abate and that the IRS error should be corrected (In much nicer wording).
Posted by tcalverley | Thursday, July 14 2016 at 6:22PM ET
I usually prefer to defend a penalty assertion or assessment by using a “reasonable cause” defense or other substantive defense before requesting a “first time abate.” I want to save that for when it’s really needed, rather than have my client waste it on what may be a minor penalty and then not have it when the stakes are much higher. However, because the cost of achieving success with first time abate may be much less than asserting a substantive defense, the client has to be made aware of the pros and cons of the alternatives. In many cases, the use of first time abate may be the preferred approach just based on the cost factor.
Posted by rwiener@dscpas.com | Thursday, July 14 2016 at 11:18AM ET
TaxPro Today

IRS Tax Updates

2016 Changes to EITC, Child Tax and Education Credits, and 2017 Filing Season Refund Delays for Returns with EITC

 

As the main part of the 2016 filing season comes to a close, it is time to emphasize the coming important changes to the preparer due diligence requirements, refundable credits, and refunds for the 2017 filing season.

The December 2015 extender bill did more than just extend the expiring tax provisions. In the Protecting Americans from Tax Hikes (PATH) Act of 2015, Congress included a “program integrity” section that dealt with the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), and American Opportunity Education Tax Credit (AOTC).

Below is a summary of what these changes are:

Refunds for Federal Returns that Claim EITC will not be Released Until February 15 Beginning with the 2017 Filing Season
The integrity provision of the PATH Act that will have the greatest impact on taxpayers that claim EITC is the one that requires the IRS to not release refunds for returns that claim EITC or the Additional Child Tax Credit until February 15 beginning with the 2017 filing season. Therefore, any return claiming the EITC or CTC credits that is prepared in the early part of the filing season will not be released for up to 4 weeks (depending on when the return is filed) instead of the standard 21 days or less timeframe.

Expansion of Preparer Due Diligence Requirements
The PATH Act expands the EITC due diligence requirements under Code Section 6695 (including the $500 penalty) to now include the Child Tax Credit and the American Opportunity Education Credit beginning with 2016 individual federal returns.

This means that the IRS will be making changes to Form 8867 (Paid Preparer’s Earned Income Tax Credit Checklist). The form will be renamed and additional due diligence related questions will be added for these two additional credits.

The IRS is in the process of modifying the due diligence regulations for the addition of the Child Tax Credit and the American Opportunity Education Credit. When the IRS releases these regulations, we will give you more details on what they contain and what changes will be made to the Tax Year 2016 Form 8867.

Earned Income Tax Credit (EITC) Changes
The PATH Act made the following changes that will affect individuals who claim EITC on their returns beginning with Tax Year 2016 tax returns:

  • Individuals cannot file an amended return to claim EITC for prior years that a qualifying child did not have a Social Security Number. This provision went into effect on the date the PATH Act became law on December 18, 2015.
  • The IRS can bar an individual from claiming EITC for 10 years if the IRS finds they have fraudulently claimed the credit.
  • The EITC is now subject to the penalty for erroneous claim for refunds and credits.
  • Incorrectly claimed refundable credits will now be taken into account when determining the underpayment penalty.

Changes for Child Tax Credit and the American Opportunity Education Credit
The PATH Act made the following changes for returns that claim the child tax credit or the American Opportunity credit beginning with Tax Year 2016 tax returns:

  • If the IRS determines that an individual has intentionally disregarded the rules for claiming the Child Tax Credit and/or the American Opportunity Education Credit they can bar them for two years from claiming either or both of these credits.
  • Individuals cannot file an amended return to claim the Child Tax Credit or the American Opportunity Education Credit for prior years that a qualifying child did not have an ITIN or SSN.
  • The EIN of the educational institution will be required to be reported on Form 8863. If it is missing the IRS will reject the return.

Recent Funding Update

IRS Funding & Taxpayer Identity Verification

February 11, 2016 – An Update on IRS Funding Patterns

As of this morning, the IRS has paid approximately 70% of refunds related to taxpayers who filed within the first weeks of the season. That leaves approximately 30% of these taxpayer refunds yet to be paid by the IRS.

This year, the IRS has generally paid refunds on a weekly cycle in a large batch of refunds near the middle of each week. In the past few years, the IRS tended to pay more refunds on a daily cycle.

We expect another large batch of refunds to be released by the IRS sometime next week, most likely near the middle of the week. Many of the currently unfunded refunds are expected to be paid by the IRS in the next weekly batch.
IRS corner stone

Taxpayer Identity Verification

If you have Taxpayers that have not received their refund and it has been more than 21 days (or thereabouts) we strongly recommend having the Taxpayer call the IRS to verify their identity.

This identity verification may be the reason for the delayed funding.

 

The Taxpayer can verify their identity by using one of the following options:

IRS Resumes Processing Tax Returns

TaxProToday
WASHINGTON, D.C. (FEBRUARY 5, 2016)

The Internal Revenue Service said it resumed processing individual and business tax returns at approximately 5 p.m. Thursday following resolution of its system outage.


Many of the tools and applications came up earlier on Thursday morning, including “Where’s My Refund” on IRS.gov. The systems had been down since Wednesday.

“IRS teams worked throughout the night and around the clock on this system outage,” IRS Commissioner John Koskinen said in a statement. “Our processing systems are back in business. Taxpayers should see little, if any, impact on their tax returns or refunds. We apologize for the inconvenience this caused, and we appreciate the support and patience from taxpayers as well as our partners in the tax community and state revenue departments.”

The IRS emphasized that taxpayers do not need to take any additional steps or action due to the outage, including people who filed just before or during the outage. Throughout this period, taxpayers were able to continue to send their tax returns to their e-file provider; these companies have already started sending these tax returns into the IRS.

Taxpayers who have received a specific refund date from the “Where’s My Refund?” tool on IRS.gov should not be affected by the outage, the IRS noted. The IRS reminded taxpayers that many variables factor into the processing of tax refunds, including fraud prevention efforts, but we continue to anticipate that nine out of 10 taxpayers will receive their refunds within 21 days after being accepted by the IRS. In addition, the IRS pointed out that IRS.gov remains the best place to check for information on refunds. Additional information is available at https://www.irs.gov/Refunds/What-to-Expect-for-Refunds-This-Year

The IRS said it is continuing to examine the underlying cause of the outage yesterday as well as monitoring any follow-up issues. At this time, the IRS added, the situation appears to be a hardware failure.