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The Suggestion Box: The 2021 Tax Season

eTAX ALERT SERIES

The Suggestion Box

Welcome to The Suggestion Box: The 2021 Tax Season.  With the startup of the 2021 tax return season, SharonKreider and the Western CPE team reached out to their experts to get their best tax season suggestions for the year. They are here to give you all the need-to-knows and advice to aid your return process with your clients.

Today, we’re touching on Part 1 of our Suggestion Box eTax Alert Series. Make sure to stay tuned for new content, as the season continues.

Encourage Clients to Create an IRS Online Account

Encourage Clients to Create an IRS Online Account. Have clients create an IRS Online Account. The IRS Online Account will allow clients to get accurate EIP information, advance child tax credit payments, and estimated tax payment information. These three items will cause the most errors on 2021 tax returns. Getting them right when you prepare the 2021 return will save countless hours of dealing with the IRS trying to resolve problems we could have prevented.

And remember that having the IRS Online Account will allow your client to authorize a power of attorney (POA/TIA) that is processed in real-time (rather than weeks or months).

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MISTAKES TO AVOID

Don’t Make This $134,000 Mistake during Tax Season. Charles and Toni Crispino[1] claimed that their tax preparer, Vincent Minelli, mailed an administrative claim for a refund of $134,000 to the IRS on April 15, 2015. The tax preparer asserted that he mailed the administrative claim using a postage label printed from a Stamps.com postage meter. He admitted that he did not send the claim for refund to the IRS via certified mail or registered mail. During his deposition, Mr. Minelli testified that he normally used the local Post Office to send documents. He also testified that he could not remember any details about April 15, 2015, except that it was a “hectic” day.

The IRS didn’t receive the April 15, 2015, claim for refund. The Crispinos’ 2009 taxes were paid in full in June 2013, so their claim for a refund was due by June 2015. The district court agreed with the IRS that Crispinos had no proof of mailing, their claim for refund was untimely, and was, thus, barred by the statute of limitations (§7422(a)).

[1] Charles Jr. And Toni Crispino V. US, US District Court for the District of New Jersey, Doc No. 3:17-CV-13751 (July 26, 2021)

What Does this tax court decision mean to you?

  1. Always file electronically if you can. The IRS is drowning in paper. The Jan. 13, 2022, Taxpayer Advocate Report described the IRS backlog as of 12-23-21.
      • 2 M unprocessed Forms 1040;
      • 8 M unprocessed Forms 941;
      • 4 M unprocessed Forms 1040X
      • 427 K unprocessed Forms 941X; and
      • 75 M unanswered pieces of taxpayer correspondence.
  1. If you mail the return, always take the time to register or certify the mail. A stamp isn’t good enough and is probably going to cost Crispinos’ tax preparer $134,000.

     

  2. If you hand the client a paper return to mail, put in writing that they should send the return by registered or certified mail.

Because Of IRS Processing Delays of Amended Returns . . .

There is another consequence of the IRS backlog. Until the IRS processes a tax return, the Taxpayer Advocate Service (TAS) cannot assist the taxpayer. For that reason, TAS will not take on new cases to help you find an unprocessed (also known as lost) individual or business amended return. This is another reason to file amended returns electronically when you can. If you must send a paper return, at least send it certified or registered so that you know the return is in the IRS Service Center. “Lost in the building” is not a lot better than “lost in the mail”. But it’s better than nothing.

Set Deadlines

Set deadlines for clients. Don’t let procrastinators run you. For example, adjust your practice workflow by adopting an engagement letter to keep your clients informed of deadlines.

Deadlines could include:

  • Feb. 15 – bulk of pass-through information submitted (no extension)
  • March 1 – Pass-through data submitted for extension
  • March 15 – bulk of individual data submitted (no extension)
  • April 1 – Individual data submitted for extension

Consider wording in your engagement letter “If you do not submit data by March 1 (pass-throughs) or April 1 (individuals), we cannot prepare a timely extension for you. If we do not prepare your extension, we will not be able to prepare your returns.”

HAVE A TAX SUGGESTION TO SHARE?

Do you have an tax suggestion to share or frequent client question you’d like answered by Western CPE experts? 

Email us at katie@westerncpe.com with the subject “2021 Suggestion Box.”

SUBMIT SUGGESTION

Sharon Kreider, CPA


Sharon Kreider, CPA, has helped more than 15,000 California tax preparers annually get ready for tax season. She also presents regularly for the AICPA, the California Society of Enrolled Agents, CCH Audio, and Western CPE. You’ll benefit from the detailed, hands-on tax knowledge Sharon will share with you—knowledge she gained through her extremely busy, high-income tax practice in Silicon Valley. With her dynamic presentation style, Sharon will demystify complex individual and business tax legislation. She’s a national lecturer for business and professional groups and consistently receives outstanding evaluations. In 2014, she was awarded the prestigious AICPA 2014 Sidney Kess Award for Excellence in Continuing Education.

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Karen Brosi, CFP, EA


Karen Brosi, CFP, EA, has an extensive California tax practice, advising clients in individual tax and family wealth planning, specializing in complex individual income tax matters and all types of securities transactions. Her background as a CFP and as a tax preparer for the wealthy makes her particularly effective in the tax and financial planning arenas. Karen teaches tax professionals how to avoid tax minefields with her extensive planning checklists and practical tips.

Besides being one of the most prominent California tax update instructors, she’s a favorite interviewee on radio, television, and in print media, such as Bloomberg Businessweek. Karen’s powerful real-life presentations pinpoint critical federal and state tax areas, teaching tax professionals what they need to know to optimally assist their clients. Karen was the recipient of the California CPA Education Foundation 2012-2013 Outstanding Webcast Instructor award.

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Mark Seid, EA, CPA, USTCP


Mark Seid, EA, CPA has over 25 years of experience in field of taxation focused on tax controversy. A National Tax Practice Institute graduate, Mark is admitted to practice before the U.S. Tax Court. He has served as an Internal Revenue Agent with the IRS in San Jose and San Luis Obispo, California, a state director for the California Society of Enrolled Agents, and the chair for the society’s Finance and Budget committee. He regularly presents courses to tax professionals on issues affecting small businesses.

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DIG DEEPER:

How The $3.5 Trillion Budget Blueprint Could Impact Your Clients

The new reporting requirements on brokers are addressed in Section 80603 of the bill. “Broker,” by definition in Sec. 6045 (c)(1), is expanded to include “any other person who (for a consideration) regularly acts as a middleman with respect to property or services…A person shall not be treated as a broker with respect to activities consisting of managing a farm on behalf of another person.” In turn, the bill defines a “digital asset” as “any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.