Tax penalties: Here's what to do if you can't pay your taxes this year


That in a nutshell describes what accountants and different tax preparers have been coping with at the federal and state ranges as they attempt to full their shoppers’ 2020 tax returns precisely and on time.

“This has been my worst tax season in 30 years of practice,” mentioned licensed public accountant Harlan Levinson of Beverly Hills, California. “So many hurdles have been thrown at us this year.”

Deadline extensions, new retroactive tax breaks, new steering after which revised steering on learn how to incorporate all the adjustments have been rolling out ever since the American Rescue Plan was signed into regulation on March 11, which got here a month after the tax filing season started and after 66 million returns had already been filed.

And there are numerous unanswered questions remaining, particularly at the state degree, the place it is unclear whether or not any given state will conform to all the federal adjustments or simply a few of them and if that’s the case, which of them.

“The changes are confusing everyone,” mentioned CPA Michelle Steubel in Rochester, New York, who additionally mentioned this tax season has been the worst one she’s skilled in her 15 years of observe.

Lynne Fuentes, a CPA in Jericho, New York, put it this manner: “Clients look to us for guidance. And sometimes you look at them like a deer in the headlights because you’re getting the information as quickly as they are.”

Steubel mentioned she suspects her shoppers secretly assume she’s not doing a great job when she says she nonetheless wants extra time to complete their returns. “I tell them, ‘The law changed on March 11.’ It sounds ridiculous.”

Many CPAs are literally turning away potential new shoppers searching for assist as a result of they’ve their arms full simply dealing with their current roster amidst all the adjustments.

“I try to help as many as I can — and this is one of the first years where I’ve been sending people away,” mentioned CPA Brian Borawski of Waterford, Michigan.

And plenty of preparers are sitting on shoppers’ returns — particularly those that acquired unemployment compensation or received a Paycheck Protection Program mortgage for his or her small enterprise — as a result of their states have not indicated but whether or not they are going to comply with the IRS and exclude the first $10,200 in unemployment earnings from tax or let small companies deduct expenses paid for with PPP money.

“I don’t like to do anything twice if I can do it right the first time,” Fuentes mentioned. “I tell my clients if [lawmakers] change their minds, you’re going to have to pay me to do it again and what are you gaining?”

But earlier than the American Rescue Plan went into impact, tens of hundreds of thousands of people and small companies had already filed their returns. And now they and their tax preparers face questions on if and when to file an amended return.

Tax penalties: Here's what to do if you can't pay your taxes this yearTax penalties: Here's what to do if you can't pay your taxes this year

The IRS has mentioned for many who already filed returns earlier than the unemployment advantages exclusion was accepted that it will determine the repair and pay the filer any further cash owed so they do not must file an amended return.

Still, tax preparers must double-check the math as soon as they hear again from the IRS.

“Do we trust the IRS to fix it correctly?” mentioned enrolled agent David Mellem in Green Bay, Wisconsin.

Preparers will even must assess whether or not the incorporation of the unemployment advantages exclusion makes their shoppers newly eligible for a number of income-based tax breaks, which the IRS will not be calculating.

If they’re eligible, “that means taxpayers have to amend their returns. But I can’t do that [for my clients] until the IRS has fixed it for the taxpayer because that’s my starting point. So I’m on hold until the IRS gets theirs done,” Mellem mentioned.

The company mentioned it won’t start issuing adjusted funds associated to the unemployment compensation exclusion till someday in May after which persevering with into the summer season.

“It’s a pain to have to explain what the change is and why we’re not going to be able to [amend] their return for awhile,” Mellem mentioned. “I don’t like congressional action in the middle of tax season.”

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