September 16, 2020
E-file outage leaves last-minute returns unfiled at deadline. Wolters Kluwer's tax software e-filing system went down yesterday ahead of the midnight deadline for filing extended 2019 partnership and S corporation returns. The system is back up this morning, but tired and irate preparers now have to deal with their late-filed returns. Eide Bailly was affected by the outage.
When the same provider's e-file was shut down by a malware attack last May 15, the IRS provided guidance to waive penalties. This guidance directed preparers to provide specific statements with the late filings. While I expect the IRS to provide similar relief for yesterday's outage, that's not guaranteed. I will update this post with any new developments.
Update, September 25: The IRS, in a September 24 memo, announced that it will treat returns filed by September 17 as timely-filed for all purposes: "IRS will treat as timely filed a return and any elections that were filed with that return (for example, a Form 3115, Application for Change in Accounting Method) that were impacted by the September 15, 2020, external tax software outage if the taxpayer successfully e-filed the return and any elections that were filed with that return by September 17, 2020."
Major Tax Software Vendor Crashes On Important Due Date - Peter Reilly, Forbes:
There are three things that are bad about being a day late. The first is that it upsets the clients regardless of any practical impact.
The second is that the penalty for being late with a flow-thorough return is pretty nasty. $205 per month (or part of month) per shareholder or partner. In my career, I have worked on returns with as many as 400 partners. Eighty grand for a day late. That is nasty.
And then there is the matter of elections. No not that election. I know we are having the most divisive presidential election since 1876, if not 1860, God forbid. The elections I am referring to go in with tax returns.
With commentary from "a CPA from Sioux City IA."
GAO Greenlights Congressional Review of Payroll Tax Deferral - Jonathan Curry, Tax Notes. "The Government Accountability Office affirmed that President Trump’s payroll tax deferral falls under the purview of Congress’s regulatory review authority, paving the way for lawmakers to try to undo the president’s unilateral action."
This allows Congress to reverse the deferral order with a vote by both houses, which seems unlikely.
Unemployment Benefits Are Taxable Income: That May Reduce EITC Refunds Next Spring - Elaine Maag, TaxVox. "The problem: Unemployment Insurance (UI) benefits are taxable income but do not count as “earnings”. That means these benefits can lower, but not raise, the EITC, potentially leaving some low-income families with an unwelcome surprise at tax time."'
California Issues Tax Guidance on COVID-19 Teleworking - Paul Jones, Tax Notes:
Gov. Gavin Newsom (D) on March 19 issued a stay-at-home order (Executive Order N-33-20) in response to the pandemic, and “as a result, many individuals living in California who ordinarily did not telework from their homes began to do so,” including employees of corporations “that previously had no connections with California,” the FTB said...
However, “California will not treat an out-of-state corporation whose only connection to California is the presence of an employee who is currently teleworking in California due to Executive Order N-33-20 as being actively engaged in a transaction for the purposes of financial or pecuniary gain or profit,” according to the guidance.
Execs Foresee Corporate Tax Hike Regardless of Election Outcome - Frederic Lee, Tax Notes. "Over two-thirds of respondents to a survey targeting corporate executives said they expect business tax rates to rise no matter how the 2020 election unfolds."
There’s A New Tax Form - With Some Changes - For Freelancers & Gig Workers - Kelly Phillips Erb, Forbes. "Last year, the Internal Revenue Service introduced a draft version of a form that we haven’t seen since 1982: Form 1099-NEC, Nonemployee Compensation. Form 1099-NEC is intended to replace the nonemployee compensation part of a form many of us have come to know and love: Form 1099-MISC, Miscellaneous Income."
Rejecting Returns That Meet Beard - Keith Fogg, Procedurally Taxing. No, this is not about tired and unshaven preparers falling face-first on the paperwork:
The IRS rejects a lot of e-filed returns for reasons that seemingly have nothing to do with whether the taxpayer filed a valid return. (see these posts) It has done this for years, decades even. This disparity between the way it treats e-filed returns and the way it treats returns mailed by snail mail catches up with it in Fowler v. Commissioner, 155 T.C. No. 7 (2020) a fully reviewed opinion with no concurrences or dissents. I don’t know if the Fowler case will serve as a wake-up call to the IRS to change its practices of rejecting returns with issues having nothing to do with whether the taxpayer actually filed a return, but it should.
Audi, MINI & Toyota Prius models added to IRS electric vehicle tax credit list - Kay Bell, Don't Mess With Taxes. "This credit ranges from $2,500 to $7,500. That's very good news since a credit provides a dollar-for-dollar reduction of any tax you might owe. In many cases, that could zero out what a taxpayer might owe."
IRS Publishes Web Page and FAQ with Information for Marijuana Industry - Ed Zollars, Current Federal Tax Developments.
Fraud in School Districts: A Difficult Issue to Detect - Brandon Waldon, Eide Bailly. "Could your district have fraud going undetected right now? The answer may be yes; however, there are ways to prevent and detect these common fraud schemes so your district can continue to succeed."
Today in History. The Xerox 914, "the first successful commercial plain paper copier," was introduced on "live television" September 16, 1959. Offices were never the same.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.