Tax Prep Dispatch: Reset Button

This Tax Prep Dispatch was guest-written by three leaders in the inaugural VITA Leadership Institute cohort. We thank them for taking the time to provide resources for this Dispatch.

April 15 has passed, so time to wrap up another tax season, right? Unfortunately, not quite this year. With the COVID-19 pandemic, constant change has been a theme throughout the past eight weeks. This Dispatch aims to clarify some of these changes as we move through the rest of this filing season.

Filing Season Updates – Amy Messinger, United Way of the River Cities

In mid-March, the Treasury Department and the IRS released a filing and payment relief notice advising taxpayers that the filing deadline for 2019 federal tax returns had been extended until July 15. The notice not only relieved taxpayers from the requirement to file a return by April 15, it also relieved taxpayers who have a payment due for 2019. Taxpayers who have filed or will file and have a payment due now have until July 15 to make the payment without accruing penalties or interest. The IRS continues to encourage taxpayers who plan to file a 2019 return to do so as soon as possible.

Federal Filing and Payment Relief

The Treasury Department and the IRS have continued to release notices which provide taxpayers relief from other obligations that normally have an April 15 due date. Here is a review:

Requesting an Extension: The last date to request an extension to file a 2019 federal return has changed to July 15, which is now the last date to submit Form 4868. October 15 is still the due date for filing the return for which a taxpayer has requested an extension. The extension does not change the July 15 due date for paying federal income tax. Taxpayers who request an extension to file a return are advised to avoid interest and penalties by paying the estimated tax due when filing Form 4868.
Estimated Taxes for the 2020 Tax Year: The payment deadlines for first quarter and second quarter estimated taxes have changed from April 15 and June 15, respectively. The due date for paying estimated taxes for both quarters is now July 15. The due dates for the third and fourth quarters have not changed: Third quarter estimated taxes are due September 15, and fourth quarter estimated taxes are due January 15, 2021.
Interest and Penalties: The filing and payment relief does not eliminate the penalty for not having made estimated tax payments for taxes due in 2019. The penalty, however, like all interest and penalties, is deferred until July 15.
Installment Plans: For taxpayers who have set up an installment plan with the IRS, the payments due between April 1 and July 15 can be deferred until July 15. Taxpayers who have set up automatic payments must take steps to suspend the payment. During this time period, the IRS will not default installment plans; however, interest will continue to accrue on unpaid balances.
IRA and HSA Contributions: Taxpayers can make contributions to an IRA, an HSA, or an Archer MSA until July 15.
Amended Returns: Per IRS policy, an amended return will be accepted for up to three years after the date it was filed or within two years if a tax payment was made. It depends on which comes first. Also, per IRS policy, for 2019 returns filed before July 15th, the IRS will consider this the filing date and amendments can be made until July 15, 2023.
2016 Returns: The relief extended the deadline for filing a return to claim a 2016 refund until July 15.

Additional information about federal filing and payment relief can be found on this page, Filing and Payment Deadlines Questions and Answers.

State Filing and Payment Relief

Each state that requires a state return is responsible for deciding if filing and/or payment relief will be provided for 2019 state returns. To check on the relief in individual states, you can refer to the National Taxpayers Union Foundation website which has the following article posted: Which States Have Delayed Tax Payments or Filings?

Taxslayer Economic Impact Payment (EIP) Update – Alisha Doulen, City of High Point

Taxslayer has deployed an update to support filing a simple tax return for EIP purposes. This is a way for VITA programs to assist taxpayers who do not normally file a tax return to receive the stimulus payment. As we all know, many of our VITA clients may not be comfortable with filing the information directly on the IRS website. For those of us with VITA grants, this is also a way to capture those numbers for the grant reporting. We have not heard any exceptions to the intake and quality review requirements under VITA for these EIP returns. That being said, with a good number of VITA sites either closed down or operating virtually, obtaining the Form 13614-C and 8879 e-file authorization will take some figuring out.

Taxslayer EIP Process

The very first step in the EIP return process should be to verify that the taxpayer should file an EIP only return. Review the IRS website for the latest information. Generally, these returns should only be completed for those individuals who did not file a tax return in either 2018 or 2019 and have no filing requirement. Returns specific to EIP will have “EIP2020” printed at the top of the form 1040 if they meet the requirements below:

The filing status on the tax return must be Single or Married Filing Jointly. Remember these returns are for EIP purposes only so MFS and HoH are not options. For this return, taxpayers with dependents are either Single or MFJ with a qualifying child(ren).
All taxpayers and dependents on the return must have social security numbers (or ATIN). Taxpayers with ITINs are not eligible with an exception made for the spouse of a military member. For dependents to be eligible for the EIP, they have been under age 17 for the tax year.
Enter $1 under the taxable interest income section. To do that you will also have to enter a “Payer’s Name”. We have used just a generic “Bank” to complete this portion. This should be the ONLY income reported on the return. There is no need to report the taxpayer’s other income (if any) for EIP purposes.

Finishing up the Return

Once the basic information and income has been entered, proceed through the remaining sections of the return so that the system allows you to enter the direct deposit information. The health insurance section should be answered “No” as it is also not applicable on this return. If the taxpayer did happen to have insurance through the Healthcare Marketplace: STOP. They have a filing requirement and should not be completing an EIP only return. Any state return that was automatically generated should be deleted. Following these steps is critical to ensuring that the return can be processed correctly. Verify that the “EIP2020” header is on the final return to determine that everything is reflected accurately. If you are not getting the “EIP2020” header, be sure that you have not entered any additional income on the return.

Points to Consider

With the IRS announcing that, as of April 16, paper returns will not be processed, those who mailed in their return earlier in the season are in for a long wait to receive their refunds. The IRS has also announced that any tax owed will be separate from the EIP process so those who owe should mail in their payments as normal as it will not be deducted from their EIP. The EIP returns will also still reject for SSN/Name mismatch errors and the like. Remember, these EIP returns are specifically for those without a filing requirement. Taxpayers can also access the EIP form here. The IRS portal may be easier to access at this moment since a lot of our VITA sites are closed or operating virtually but this is a nice tool for those who cannot access the internet, are not comfortable doing so, and depend on our VITA services for assistance.

Economic Impact Payment Recap – Katrina Madden, United Way of West Florida

The Economic Impact Payment is part of the CARES Act, which offers relief to millions of Americans who have been affected by the COVID-19 pandemic. Most eligible individuals have already started receiving payments of $1,200 with an additional $500 for each qualifying child under the age of 17. Those who filed joint returns will receive $2,400 with an additional $500 for each qualifying child under the age of 17. You will most likely qualify for an economic impact payment if:You have not been claimed as a dependent on someone else’s tax return.

Your filing status is single or married but filing separately, and your adjusted gross income is less than $99,000.
Your filing status is head of a household, and your adjusted gross income is less than $136,500.
Your filing status is married and you file jointly, and your combined adjusted gross income is less than $198,000.

Taxpayers whose adjusted gross income is above $75,000 as an individual or $150,000 as a joint filer, the payment amount will be reduced by $5 for each $100 above the income limit.

Will I get the Economic Impact Payment if I am on SSI or SSDI?

If you receive Social Security benefits and do not typically file taxes, don’t worry! You do not have to take any action. The IRS will use the information the Social Security Administration has on file to automatically send your Impact Payment.

Do I still get the Economic Impact Payment if I do not file taxes?

If you have not filed a tax return for 2018 or 2019 because your income did not exceed $12,200 ($24,400 for married couples) or you were not required to file a federal income tax return for 2019 and didn't plan to, you may still qualify for an Impact Payment. You will need to go to this page to enter your necessary information. The IRS will use this information to determine your eligibility and payment amount and send you an Economic Impact Payment. After providing this information you will not need to take any additional action. If you are required to file a federal income tax return and have not filed your taxes in 2018 and 2019 you will need to file your 2019 taxes to receive the Economic Impact Payment.

How do I update my banking information?

The IRS has made it very simple to track your Economic Impact Payment as well as update your direct deposit information! The IRS has created an online web portal called Get My Payment. You will be able to check your payment status, confirm your payment type (direct deposit or check), and enter your bank account information for direct deposit. Just follow this link.

You can find more information on the Economic Impact Payment by visiting the IRS page.