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IRS Sending Overdue Notices For Checks Sitting In Its Unopened Mail

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A new notice appeared on the IRS website late on August 13th:

Pending Check Payments and Payment Notices: If a taxpayer mailed a check (either with or without a tax return), it may still be unopened in the backlog of mail the IRS is processing due to COVID-19. Any payments will be posted as the date we received them rather than the date the agency processed them. To avoid penalties and interest, taxpayers should not cancel their checks and should ensure funds continue to be available so the IRS can process them. To provide fair and equitable treatment, the IRS is providing relief from bad check penalties for dishonored checks the agency received between March 1 and July 15 due to delays in this IRS processing. However, interest and penalties may still apply. Due to high call volumes, the IRS suggests waiting to contact the agency about any unprocessed paper payments still pending.

Claudia Hill, EA (always one of my favorite speakers at the annual IRS Tax Forum), wrote an excellent and somewhat scathing article in Forbes regarding the current disaster we as CPAs are dealing with on behalf of our clients — the IRS is many months behind in opening its mail, yet their automated system for sending out scary letters to taxpayers for unpaid taxes is back up-and-running.

Reports Claudia, having spoken to a “a hard-working, somewhat overwhelmed IRS customer service representative”:

… while IRS automated computer billings had resumed, any mail received at the Service Center between March 13 and June 30 was likely still unopened in the rooms of boxes containing mail that had arrived during the Covid-related shut-down. This included tax returns and payments directed to Service Center addresses. The Service Centers received about a million pieces of mail per week during that time. No one was there to open it.

IRS billing process is consistent; it is machine programmed. After the first letter goes out, approximately four weeks later if no money is deemed received, a second notice goes out. Each letter becomes sterner. By the third letter, IRS is reminding taxpayers of their rights to lien, levy and seize in the event of non-payment.

As she rightly points out, ignoring IRS notices can lead to serious problems — because their system is automated, a human being must intervene in order to (as I’ve always described it to clients) throw a cog in the wheel to stop it from churning.

The problem is exacerbated by the fact that these days, getting an IRS representative on the phone is rather difficult. If you are in this situation, I recommend calling the phone number on your notice during non-peak hours (7-10 am & 6-7 pm), Tue-Thu (if you do not have a number on your notice — the main one is 1-800-829-1040). Be ready to turn on your phone’s speaker and keep yourself busy with a project in the meantime. Or, as was recommended by John Sheeley, EA in his weekly tax update class yesterday, use an app that waits on hold for you and calls you back when a rep comes on the line.

Claudia offers these suggestions for the call:
1) Get your documentation ready:
– copy of the certified mail receipt
– copy of your checkbook showing you wrote the check
– copy of your bank statement showing it has not been cashed
2) If you are told about the mail delay, ask them to place a “stay-up” on your account for as long as they believe it will take to open the mail and process millions of pieces of correspondence and checks.

And good luck!

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.

COVID-19 Financial Relief, IRS, Tips

Filing Form 7200? Use IRS Dedicated Fax Line

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From the IRS e-News for Small Business Issue 2020-13 today, a note encouraging businesses to use a new fax line to file Form 7200. The IRS still is ramping up staff and catching up departments post-quarantine, so in order to get your advance payment as quickly as possible, please follow their instructions and use the dedicated fax line.

(If you are working with a payroll company who is filing Form 7200 for you, confirm they are taking care of it — do not simply assume. I’ve already come across two companies so far who won’t do it. Time to switch payroll companies, in my opinion.)

IRS Form 7200 fax line:
Employers use Form 7200 to request an advance payment of the tax credits for qualified sick and qualified family leave wages and the employee retention credit. The employer tax credits for qualified sick leave wages and qualified family leave wages apply to those wages paid from April 1, 2020, to December 31, 2020.

Businesses should fax the completed form to 855-248-0552.

Due to scheduled maintenance, the 7200 fax line will be unavailable from August 7 at 10 p.m. to August 8 at 7 a.m. ET.

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IRS, Tips

IRS Confirms July 15 Tax Deadline

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The IRS confirmed in a press release that the July 15th due date for filing will remain as-is, with no further changes.

Treasury Secretary Mnuchin had said last week that he hadn’t ruled out moving the deadline again, but this newest announcement makes it clear that July 15th is the new April 15th.

Taxpayers who can’t meet the July 15 due date can request an automatic extension of time to file — it’s a six-month extension from the original filing date of April 15 (not the extended due date), which means it will extend the time to file to October 15, 2020.

The IRS offers a plethora of filing and payment options and reminds folks that filing an extension gets you more time to file your return, but not to pay any balance due. If you think you’ll have a balance due, I recommend you work with a professional to calculate what it might be, and submit payment with your extension, to avoid penalties and interest on late payment.

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.

COVID-19 Financial Relief, IRS

Pandemic Leads To “Paradigm Shift” At IRS

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IRS Officials at Thursday’s NYU Tax Controversy Forum, presented by CPA Academy.

As the IRS begins slowly opening its offices in various states over the next four weeks, a panel of IRS officials discussed the recent changes and next steps at Thursday’s NYU Tax Controversy Forum, presented via CPA Academy.

Accounting Today released an excellent article yesterday, detailing much of what was shared. I’m providing a summary of quotes from their write-up.

I had been frustrated recently by a pretty big “fail” on the part of the IRS, where suddenly all of their notices — the letters that were not sent out during the period when employees were offsite — were mailed to taxpayers months late, causing a great deal of confusion and anxiety. As it turns out, for as many changes as the IRS was able to make to allow employees to process work offsite, one thing the IRS was not able to pivot effectively was anything that involves paper.

Sunita Lough, Deputy Commissioner for Services & Enforcement at the IRS, explained, “we’ve had 136 million returns filed and we’ve processed 134 million, but there are a number of paper returns that are in the mail that need to be opened and processed. We estimate that we receive 1 million new pieces of mail each week. Think about all of the weeks that we were closed. Our mailrooms are opening 5 million per week. We’re working really hard to open them. We currently have about 11 million pieces of mail that are unopened, but we are continuing to make progress.”

Accounting Today reported that among the areas where improvements were made, the IRS was able to offer some more flexibility for communicating with taxpayers and tax professionals by enabling secure email to be sent. “We created a way for people who are in compliance contact with us or have applications pending like the exempt organizations to be able to communicate with us through email, which is something we have never done,” said Lough.

They also reported that Eric Hylton, Commissioner of the IRS’s Small Business/Self-Employed Division, said he has seen more collaboration than he’s ever seen before in his 30 years at the IRS. “We’ve been extremely busy,” he said. “A lot of long conversations, late-night conversations….”

“Yes, we were hit with the crisis, but we also thought about what is the opportunity that we can take advantage of. I think we did yeoman’s work as it relates to getting our nonportable workforce into a telework environment. With SB/SE, we increased our numbers by 40 percent, which was outstanding. We had a lot of different efforts and a lot of different managers doing outstanding work to try to assist employees to get telework ready. Ultimately, that’s going to be a paradigm shift for us as we move forward.”

He believes telework will offer more flexibility with new seasonal hires, as well as office space. “There are certain pockets around the country where we could actually have more employees if we have the space, so it gives us an opportunity to look at this environment and turn this crisis into an opportunity,” said Hylton.

Doug O’Donnell, Commissioner of the Large Business & International Division, is seeing more collaboration across divisions. He also highlighed the new secure email system. “This really improved our ability to work in a telework environment. In addition to being able to send and receive documents, we also had an improved capability to accept signed documents,” he said. “We greatly improved our ability to operate in that environment and are actually progressing on work from our homes, which was a significant change from where we’ve been operating previously.”

Tammy Riperda, Commissioner of the IRS’s Tax Exempt and Government Entities Division, said that some of the managers in the her division would retrieve applications for tax-exempt status that arrived in the mail and deliver them curbside to the determination specialists who were driving up in their cars. The employees could then take the applications home and work through them in a telework environment. “Kudos to those managers and the ingenuity that they had and the ambition that they had to keep things going,” said Riperda.

But she acknowledged there is still a delay with paper-filed information returns, such as the Form 990 series. “We’re still trying to proceed with the processing of those as best we can,” said Ripperda. “But even those, as well as the processing of the applications, we’re unable to get them uploaded to TEOS, the Tax-Exempt Organization Search tool on IRS.gov, because of some back-end processing requirements for those uploads.

“But really it can almost be seen as fortunate timing that we stopped accepting paper applications for 501(c)3s on April 30 of this year.” Lough pointed out that the Form 1023 application for tax-exempt status was mandated to be electronically filed after that date.

“It was just kind of dumb luck,” Riperda agreed.

Read the full article here: Accounting Today | IRS Employees Are Returning To Offices Amid Coronavirus

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.

IRS, Tips

IRS Suddenly Delivering Thousands Of Late Letters — Extends Due Dates on Balances

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Due to office closures, the IRS wasn’t able to mail out letters to taxpayers. The overdue notices are being delivered to taxpayers now — and confusing us all to no end. The IRS says the due dates printed on the notices have been extended.

I received a few panicked texts and chats from clients and colleagues this week, as a result of the receipt of IRS letters with dates such as April 6th and May 4th (mind you, today’s June 16th — making these letters 1.5-2.5 months late).

As it turns out, the IRS wasn’t able to mail out the pre-printed letters to taxpayers due to office closures during the ongoing COVID-19 pandemic. Apparently, given the amount of time it would take to reprogram IRS systems and generate newly-updated notices, “some of the notices that taxpayers will receive show due dates that have already passed.” They claim that each notice will come with an insert confirming that the due dates printed on the notices have been extended.

However, this was not the experience we had — in the first case I encountered, no insert was received, and not only had the due date passed… but the letter-date itself was more than two months’ passed; and in the intervening months, a refund check had arrived, with no explanation. The amount they were claiming was due in the most recent back-dated letter had a) since been paid, then b) found erroneous and then c) refunded. Imagine my client’s confusion.

Normally I’m a huge fan of the IRS — inasmuch as I recognize how overworked and underfunded they are. But there’s no way to view this other than a major clusterfest.

And my clients and colleagues aren’t the only ones freaking out. Basically what happened was that since the IRS was shut down for a while due to the COVID-19 pandemic, letters weren’t going out — so when they reopened, ALL these late letters went out. This was apparently the week for it — loads of people are getting letters all-of-a-sudden, with no reference to any activity since then. Furthermore, a lot of people are getting “late payment” letters for various taxes that were due 4/15, because they didn’t change their system internally to reflect the new due date of 7/15. According to Accounting Today, the IRS said Monday that these notices will be delivered to taxpayers in the next few weeks, so expect a lot of scared, confused taxpayers.

Solutions? Well, if this is due to personal income taxes, you can go to the IRS website and check to see if you have a current balance due; but to my knowledge they do not have a similar system for payroll taxes, unfortunately. In this case you could try to call the IRS, but they’re still not entirely ramped up yet, so the hold time could be interminable. In case you want to give it a try (especially if you’re concerned about penalties or interest), then the number for business services is 800-829-4933.

This is, by the way, CRAY-CRAY. I’m 48 years old and have never seen anything like this.

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.

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E-Filing Finally On The Way For 1040-X Amended Returns

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This post:
1) has nothing to do with the PPP!
2) is all good news!

The Journal of Accountancy and many other news outlets reported the happy news from the IRS today that later this summer, the 1040-X (Amended Individual Income Tax Return) will be available for e-filing.

From the IRS:

Making the 1040-X an electronically filed form has been a goal of the IRS for a number of years. It’s also been an ongoing request from the nation’s tax professional community. Currently, taxpayers must mail a completed Form 1040-X to the IRS for processing. The new electronic option allows the IRS to receive amended returns faster while minimizing errors normally associated with manually completing the form. About 3 million Forms 1040-X are filed by taxpayers each year.

The new electronic filing option will provide the IRS with more complete and accurate data in an easily readable format to enable customer service representatives to answer taxpayers’ questions. Taxpayers can still use the “Where’s My Amended Return?” online tool to check the status of their electronically-filed 1040-X.

When the electronic filing option becomes available, only tax year 2019 Forms 1040 and 1040-SR returns will be able to be amended electronically. Taxpayers will still have the option to submit a paper version of the Form 1040-X.

“This new process is a major milestone for the IRS, and it follows hard work by people across the agency,” said IRS Commissioner Chuck Rettig. “E-filing has been one of the great success stories of the IRS, and more than 90 percent of taxpayers use it routinely. But the big hurdle that’s been remaining for years is to convert amended returns into this electronic process. Our teams have worked diligently to overcome the unique challenges related to the 1040-X, and we look forward to offering this new service this summer.”

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Education, IRS, Tips

IRS Switching to Prepaid Debit Cards For Stimulus Payments

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UPDATE 6/7/2020 — per the IRS: there are two recent changes from MetaBank, the issuing company for the EIP Card program. Individuals who have lost or destroyed their EIP Card may request a free replacement through MetaBank Customer Service. The standard fee of $7.50 will be waived for the first reissuance of any EIP Card. The company has also increased the limit on ACH transfers to a bank account from $1,000 to $2,500 per transaction.  Additional information is available at EIPcard.com and the IRS FAQs, starting at Question 45.

——————————————

HEADS-UP — if you have not already received your stimulus check, it may be arriving in the form of a prepaid debit card.

The IRS sent a reminder to taxpayers this week confirming that some Economic Impact Payments are being sent via prepaid debit card instead of paper check. The debit cards arrive in a plain envelope from “Money Network Cardholder Services.” Nearly 4 million people are being sent their Economic Impact Payment by prepaid debit card.

CPA Practice Advisor reports, “IRS began distributing economic stimulus payments in April via direct deposit to taxpayers who had up-to-date information on file. It followed up with payments by paper check starting in mid-May. However, the agency estimated it might take as long as four to five months to mail out the millions of remaining checks. Now it says that sending four million prepaid debit cards will cut down on the time.”

Per the Treasury Department’s press release:

EIP Card recipients can make purchases, get cash from in-network ATMs, and transfer funds to their personal bank account without incurring any fees. They can also check their card balance online, by mobile app, or by phone without incurring fees. The EIP Card can be used online, at ATMs, or at any retail location where Visa is accepted.

This free, prepaid card also provides consumer protections available to traditional bank account owners, including protections against fraud, loss, and other errors. 

Hopefully this will not end up like the fiasco whereby folks have been throwing out their prepaid Key Bank cards loaded with unemployment funds.

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Update Stimulus Check Direct Deposit Info With IRS By May 13th

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Per the IRS on May 8th:

Starting later this month, the number of paper checks being delivered to taxpayers will sharply increase. For many taxpayers, the last chance to obtain a direct deposit of their Economic Impact Payment rather than receive a paper check is coming soon. People should visit Get My Payment on IRS.gov by noon Wednesday, May 13, to check on their payment status and, when available, provide their direct deposit information.

The IRS, working in partnership with Treasury Department and the Bureau of Fiscal Services (BFS), continues to accelerate work to get Economic Impact Payments to even more people as soon as possible. Approximately 130 million individuals have already received payments worth more than $200 billion in the program’s first four weeks.

With a variety of steps underway to speed Economic Impact Payments, the Treasury Department and the Internal Revenue Service urged people to use Get My Payment by noon Wednesday, May 13, for a chance to get quicker delivery.

See this handy blog post for tips, tools and resources on IRS Stimulus Payments.

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.

IRS, Tips

IRS Stimulus Check Tools & Resources

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UPDATE 4/24: Reported by a client — and tested independently: YOU MUST ENTER YOUR EXACT ADDRESS AS IT IS LISTED ON YOUR TAX RETURN TO GET ANY OF THE TOOLS TO WORK.
E.g., if your return abbreviates “Drive” as “DR” or “Dr.” or “Drv”… this will make a difference. Be sure to type the address into the tools exactly as it is represented on your most recent tax return.

UPDATE 4/27: The IRS made significant improvements to the “Get My Payment” system this past weekend and asks those who had issues with it before to please try again.

UPDATE 4/27: When the system asks you to enter your refund from a prior year (to confirm identity), they mean the actual amount disbursed to you — not the amount rolled forward to your quarterly taxes.

UPDATE 4/29: On an NATP webinar today, I learned that there’s no auto-formatting in any of the IRS tools — you must enter dashes in your SSN and slashes when entering dates.

The stimulus checks are on their way, and have already found themselves popping up in bank accounts across the country. Here are a few tools you can use to calculate how much you should expect to receive, and to inform the IRS of your bank account information for direct deposit.

How Much Is My Stimulus Check Going to Be?

Forbes has put together a nice little calculator for you. They also do a good job of answering some common questions and explaining the source of info the IRS will use for its calculations:

For those who have filed their 2019 taxes, they will be used to determine eligibility. For those who have not filed 2019 returns, their 2018 tax returns will be used. Those who receive Social Security (either retirement or disability) but didn’t file a return in 2018 or 2019 (because they earn too little to be required to file), will also receive stimulus checks, based on the information sent to the IRS on 2019 forms SSA-1099 and RRB-1099.

Do not just presume that you aren’t entitled to a payment because you think you made too much money. For one, the stimulus check amount gets phased out over a wide range of income — it’s not like it just cuts off if you made over a certain dollar amount. Secondly, some folks think they made too much because of W-2 or investment income, but various deductible losses actually brought the adjusted gross income (AGI) below the required limit. So go check on it, and update your bank information (below) with the IRS just to be safe.

When Will My Stimulus Check Arrive?

Hopefully it will arrive via direct deposit in the next couple of weeks. But you don’t have to guess — you can look up the status on “Get My Payment“, a new IRS tool which will also allow you to enter direct deposit information if you have not already been getting refunds in that manner. Again, Forbes is doing a great job reporting on this — they actually walk you through the process on the website step-by-step with screenshots.
Note: Be sure to type all information, including the address abbreviations, exactly as it is represented on your most recent tax return. Use dashes in your SSN and slashes in your dates.

How Do I Update My Direct Deposit Information with the IRS?

If you’re a regular filer and you simply have been receiving paper checks or rolling your refund forward — and therefore do not have direct deposit information on-file with the IRS — simply use the “Get My Payment” tool I just mentioned above. Here are instructions on how to update your bank information using that tool.
Note: Be sure to type all information, including the address abbreviations, exactly as it is represented on your most recent tax return. Use dashes in your SSN and slashes in your dates.

If you haven’t filed a return because you’re below the income limits or you receive veterans benefits, then use the tool the IRS designed specifically so you can get your stimulus check. More info on that tool here, including situations when you should or should not use it.
Note: Be sure to type all information, including the address abbreviations, exactly as it is represented on your most recent tax return.

Social Security and Railroad Retirement Benefits recipients will receive their stimulus check automatically — no need to use either of the above resources.

What If I Got My Refund Via A Loan Or Advance?

The IRS will either direct deposit your money or send you a check, depending on whether or not your underlying bank information was transmitted to them with your tax return. More info on that here.

What if I Am A Dependent? What If My Kid Lives With Me But Is Not A Dependent?

The first question is easy: dependents aren’t eligible for these payments. Parents get an additional $500 per child instead. Unless (second question)… they’re over 16. Another Forbes article here commiserates with those in this situation.

The IRS is updating its FAQ regularly, so check back if you don’t initially find the answer to your question.

And you know what they say: don’t spend it all in one place.

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.

IRS, Software, Tips

IRS Free File Program For Taxpayers With $69,000 of Income Or Less

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The IRS has a partnership with ten leading tax preparation software companies that allows users with income of $69,000 or less to use their Free File Software program — though fees for state returns and/or e-filing will apply, and the service is not available for all tax forms.

(As a tax preparer, I feel an obligation to point out that how much money a person makes rarely correlates to their being qualified to self-prepare tax returns, and that there are many situations when working with a qualified and responsible CPA or EA will be a much better decision. However, if you are going to be preparing and filing your own taxes anyway, why not take advantage of the Free File program if you meet the requirements?)

Free File Software provides free federal tax prep and e-file for taxpayers. Select a brand-name software program, create an account, and then the software guides you through return preparation.

  • Use free brand-name software to prepare and print.
  • Software guides you through return preparation.
  • Need Help with an error or the software? Contact the company for free customer service.
  • State return preparation and e-file is available for free but fees may apply.
  • Available if your Adjusted Gross Income (AGI) is $69,000 or less.
  • Offers the most commonly used forms.

Source: About the Free File Program | Internal Revenue Service