A short article in today’s Accounting Today newsletter (which I highly-recommend) included an extremely helpful snippet that I want to make sure to spread far-and-wide.
For those waiting on their 2020 tax return to be processed, enter $0 (zero dollars) for last year’s AGI on the 2021 tax return.
For those who used a non-filer tool in 2021 to register for an advance Child Tax Credit or third Economic Impact Payment in 2021, enter $1 (one dollar) as the prior-year AGI.
All others should enter the prior year’s AGI from last year’s return. Tax preparation software that was used last year will auto-populate this field.
And my personal suggestion to add to this list — make sure to get a transcript before trying these, since there is some possibility that your tax return has already been processed and you are unaware of it, or that the answers you’re looking for will show up on a wage and income transcript (stimulus and child tax credit payments, as well as estimated tax payments, for example).
Hopefully these tips will help expedite your tax return filing and processing — but as the article points out, “significant backlogs, lack of adequate staffing, difficulty reaching tax authority agents by phone and pandemic-related IRS and state and local office closures” are making this tax season particularly challenging one for tax professionals and taxpayers.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Last year we began requiring all clients to submit a copy of their IRS Account Transcript along with their Tax Organizer and other annual tax prep documentation.
The initial issue was that not everyone kept the Form 1444 notices regarding how much stimulus was received. Why would this matter? If a taxpayer did not receive the full amount, then they are entitled to recoup the difference on their annual tax return. (But don’t worry: if you received too much, you don’t have to pay it back — unless it was obtained fraudulently.) Not only does this issue remain for 2021, but the problem is exacerbated, because now we also have child tax credit payments to track — some folks received advances while others decided to opt out (and unlike stimulus payments, any excess child tax credit payments may have to be repaid).
In addition, we’ve also noticed quarterly estimated taxes are often reported incorrectly by clients — especially with additional complexities due to recent state legislation to get around federal limits on deducting state taxes.
We’ve come to the conclusion that the best solution to these concerns is to continue to ask clients to download their annual Account Transcript and provide it to us via secure upload. It’s free, reasonably easy, and reliable.
Instructions for obtaining the Account Transcript for folks who have already registered for an IRS online account follow — if you did this last year, you don’t need to follow all the steps in last year’s post about how to create an account. Just sign in to the system and you should be golden.
(Yes, the IRS will ask you to create a new ID.me account “as soon as possible” and you won’t be able to log in with your existing IRS username and password starting in summer 2022. But for now, no need to create a new account in the new system — the old one works just fine.)
You’ll need to select the reason you need a transcript.
In this case, you would select “Other”.
4. Leave the Customer File Number blank and click “Go”.
5. The screen will display all four types of transcript options and the available years.
6. Select “2021” under “Account Transcript” (the box in the lower-left).
Make sure you are selecting the right kind of transcript — in this case you want an Account Transcript. (Click here for information on what each of the types of transcripts are.)
And like magic, a pdf pops up in a new tab of your browser with a letter from the IRS — and if you scroll down to the bottom, there’s section detailing all the transactions you need.
At this point, print the file to pdf and save somewhere safe, along with the rest of your tax season documents.
What about state information?
To get a list of the estimated tax payments you’ve made to the state of Illinois, go to https://mytax.illinois.gov/?link=1040EPy and enter your SSN, Name, and the year (in this case 2021).
If you also made payments from a corporation or partnership, you’ll need to log into your MyTaxIllinois business account to get those.
Done! Let the tax return preparing begin!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
This year, along with the usual year-end forms we ask clients to submit so we can prepare their taxes, we are also asking them to provide Notice 1444 & 1444-B — respectively, the letters that arrived with each of the two stimulus payments (or if direct deposited, around the same time).
However, because these Notices didn’t look like official tax documents, but rather letters from the White House, many taxpayers didn’t read or retain them. The letters contained this information:
The amount of the payment
A phone number to call with issues
Where to find information about the payment on irs.gov
How the payment was made i.e. direct deposit, check, or debit card
Because the IRS does not have the resources this year to create an online “lookup tool” the way they did the last time the government issued stimulus checks — their “Get My Payment” system simply states whether or not a payment was received, and not the amount — then as tax preparers we need the Notice 1444/1444-B to know whether the full amount was issued, or a lesser amount.
Why would this matter? If a taxpayer did not receive the full amount, then they are entitled to recoup the difference on their 2020 tax return.
(But don’t worry: if you received too much, you don’t have to pay it back — unless it was obtained fraudulently.)
After attending numerous year-end tax update courses, we’ve come to the conclusion that the best solution to the missing stimulus payment letter is to have clients download their own 2020 Account Transcript. It’s free, reasonably easy, and reliable.
Keep in mind that Steps 2-9 are one-time only, to register for an account. Once you have a login and password, you can easily access the site anytime you need a transcript.
3. Click “Continue” to register for an account. Once you’ve done this, you should save your login information so you can use it every time you need to order a transcript of any type (for example, a transcript of your most recent tax return).
4. You will need to provide various types of information to validate your identity. Click “Continue” or “Yes” for the next few screens, until you reach the “Let’s Get Started” page.
5. Enter the required information, click “Send Code”, and then check your email for the code and enter it on the following screen.
6. Enter the required information exactly as it appears on your tax return (SSN, date of birth, street address and zip code), then click “Continue”.
When entering the information into the IRS address matching system note the following:
Refer to your most recent tax return and enter the address exactly as it is on your return; for example, spelling out the word “Street” rather than using the abbreviation “St” could be enough to cause an error.
However, addresses in the IRS system are sometimes auto-corrected through a postal-address validation program and frustratingly, may not match what you put on your tax return. If you are having problems getting the address to match, try running your address through the USPS and trying the auto-corrected version.
7. To validate your identity, the IRS will need an account number from one of your financial accounts. You are able to use any of the following: a) Credit Card Number (your credit card will NOT be charged); b) Auto Loan Account Number; c) Mortgage or Home Equity Loan Account Number; or, d) Home Equity Line or Credit Account Number.
(If you do not have one of these, the system will not work for you and you’ll have to request a transcript by mail. And given Covid-19 wait times, that could take months, sadly. Don’t get me started on how inequitable this is.)
8. Enter your Mobile phone number and an Activation Code will be sent to you. Enter your code on the screen and click “Continue”.
9. Create a User Name and Password and Login.
Now you have an account! The rest is easy.
10. Once you’re in the system, you’ll need to select the reason you need a transcript.
In this case, you would select “Other”.
11. Leave the Customer File Number blank and click “Go”.
12. The screen will display all four types of transcript options and the available years.
13. Select “2020” under “Account Transcript”.
Make sure you are selecting the right kind of transcript. (Click here for information on what each of the types of transcripts are.)
And like magic, a pdf pops up in a new tab of your browser with a letter from the IRS — and if you scroll down to the bottom, there’s section detailing all the transactions you need.
The two rounds of stimulus payments will have these codes:
At this point, print the file to pdf and save somewhere safe, along with the rest of your tax season documents.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
