January 18, 2021
Dear WZ Clients, Business Associates and Friends,
The IRS is delaying the start of the 2020 tax filing season to Feb. 12, according to an announcement Friday from the agency.
On that date, the IRS will start accepting and processing last year’s tax returns.
Normally, the agency opens tax season in late January.
This year, however, the IRS will need more time to prepare after the COVID relief act that took effect in late December. And yes, the tax filing deadline is still April 15.
“If filing season were opened without the correct programming in place, then there could be a delay in issuing refunds to taxpayers,” the IRS said in its announcement.
“These changes ensure that eligible people will receive any remaining stimulus money as a recovery rebate credit when they file their return,” the agency said.
The recovery rebate credit is a new addition to the federal income tax return, and it’s available to filers who didn’t receive the full amount of stimulus they’re entitled to.
“While I am disappointed that this year’s filing season will begin later than usual, I recognize that the IRS has faced extraordinary challenges throughout the COVID crisis,” said House Ways and Means Committee Chairman Richard Neal, D-Mass.
“It’s a relief to know that despite contending with the distribution of two rounds of economic impact payments, facility closures and other disruptions, the agency will be able to begin accepting returns within the next month,” he said.
The IRS is recommending that taxpayers submit their returns electronically and use direct deposit as soon as they’re ready.
Refunds in March for some
Early filers who claim certain tax credits will be waiting until the first week of March to get their much-needed refund. The IRS said this would still be the case if the filing season opened in late January.
Low-income taxpayers who receive the earned income tax credit or the additional child tax credit generally can’t receive a refund before mid-February.
That’s because an anti-fraud law requires the IRS to use the additional time to review those returns to prevent refunds from being issued to scammers.
The agency expects filers who claim the earned income and additional child tax credits will collect their refunds the first week of March – assuming they file electronically and there are no issues with their returns.
Having your return flagged by the IRS can result in significant delays.
Last year, IRS fraud filters caught 5.2 million returns that were claiming refunds, according to a recent report from the Taxpayer Advocate Service, an IRS watchdog.
For about a quarter of those returns flagged for income verification, refunds took longer than 56 days.
About 2 in 10 of the returns flagged for identity verification had delays of more than 120 days.
Normally, the turnaround time for a refund is about 21 days if a tax return has no problems.
Headaches for tax pros and clients
Companies distribute Form W-2 to their employees in January. These documents spell out how much workers have earned, as well as what they paid in income and payroll taxes during the year.
“You can’t get your refund until the IRS opens filing, and there are people who get refunds who are used to filing as soon as they open up,” said Ed Zollars, CPA and partner at Thomas, Zollars & Lynch in Phoenix and an instructor at Kaplan Financial Education.
Taxpayers who submit their returns in paper format are risking delays. The IRS accumulated a large backlog of mail last year amid the pandemic, and returns have taken a longer time to process.
There were still 7.1 million unprocessed individual returns and 2.3 million processed business returns as of Nov. 24, the Taxpayer Advocate Service found.
“If you, for any reason, think that a paper return makes sense for you, reconsider,” Zollars said.
AS ALWAYS, WAGNER & ZWERMAN IS HERE TO ANSWER ALL OF YOUR QUESTIONS AND CONCERNS. WE ARE ALL IN THIS TOGETHER.
STAY SAFE AND HEALTHY
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