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02-18-21 IRS behind in Processing 11 million 2019 returns!

A group of Republicans on the House Ways and Means Oversight Subcommittee sent a letter Wednesday 02.18.21 to IRS Commissioner Charles Rettig complaining about the backlog of approximately 11 million unprocessed tax returns from the 2019 tax year. The backlog of unprocessed mail from the pandemic has created a ripple effect that’s continuing into this year’s tax-filing season, which opened last Friday.

The problem isn’t only with the mail, which piled up last year in trailers outside IRS facilities until IRS employees could return to their offices and open it. While most of the millions of pieces of mail have reportedly been opened, much of it remains unprocessed. That’s causing headaches for taxpayers and tax professionals alike, who are coping with past due notices sent automatically by IRS computer systems, even when payments were sent months ago, according to the investigative news site ProPublica. Taxpayers have had trouble with receiving their Economic Impact Payments from last year and are also having trouble reaching the IRS by phone this year, with the agency continuing to be understaffed due to the pandemic and budget cuts in past years.

IRS Commissioner-BACKLOG of UNOPENED

November 20, 2020
Currently, the IRS has approximately three million pieces of mail and one million returns that remain unprocessed, IRS Commissioner Charles “Chuck” Rettig said. The IRS mail backlog is down from where it sat at over five million last month.
Testifying before the House Ways and Means Oversight Subcommittee on November 20, Rettig told lawmakers that the IRS is “doing everything we can to reduce this [mail] backlog.” To that end, Rettig also detailed relief being provided for taxpayers who have sent the IRS mail that remained unopened for a certain period of time.
For more detail 

Read NSA's article here.

Qualified Disaster Payments to Employees During COVID-19

§139 of the Internal Revenue Code (the “Code and if you ever tried to read it you will know why they call it Code)”) excludes from a taxpayer’s gross income certain payments to individuals to reimburse or pay for expenses related to a qualified disaster. CONVID-19 is considered a Qualified Disaster in all states....

A “qualified disaster relief payment” is defined by §139(b) of the Code to include any amount paid to or for the benefit of an individual to reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster.  Qualified disaster relief payments do not include qualified wages paid by an employer, even those that are paid when an employee is not providing services.

We interpret these expenses to be things like... the purchase of masks, hand sanitizers, computers so you work online or receive education online and probably many others we have not thought of.  The employer can deduct and pay this to employees with no tax consequences to the employee.

Thank you to Attorney Jon Alper www.AlperLaw.com  for the heads up on this.

 

Premature Distribution during VIRUS

When a premature distribution is made, it needs to be marked as a coronavirus-related distribution.  The distribution can be made any time in 2020 up to an aggregate limit of $100,000 and the 10% additional tax is waived.  You can also spread out the tax burden over three years (2020, 2021, and 2022) or decide to include the entire distribution in your income for the year of the distribution.

https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers

RMD's for 2020 (BIG CHANGE)

RMD (Required Minimum Distribution)
 
Acknowledging that Americans are living and working longer, the SECURE Act increases the RMD age from 70½ to 72, applicable to distributions made after Dec. 31, 2019, for individuals who reach 70½ from Jan. 1, 2020 on.
 

NOL (Net Operating Loss) Changes for 2018

A net operating loss (NOL) is when business losses exceed income.

Prior toJanuary 1, 2018, NOLs were able to offset 100% of taxable income. They were allowed to be carried back two years and carried forward for twenty years.  You could affirmatively elect with a timely filed return to NOT carryback (the default) and instead carry forward only (permanent, could not change it for that year).

Under the new law effective in 2018, an NOL can offset only 80% of taxable income in any given tax year. NOLs can be carried forward only. The 20-year carryforward period is changed to an indefinite carryforward period NOLs created in tax years beginning before January 1, 2018 are subject to the old rules. Only NOLs generated in tax years beginning after December 31, 2017 are subject to the new rules.

Affordable Care Act Penalty Exemptions

Special hardship exemptions have to be applied for.... and when taxpayer receives an ECN (exemption certificate number) we can input that and the penalty goes away.   Has to be applied for....

Here is the link.

https://www.healthcare.gov/health-coverage-exemptions/hardship-exemptions/

If you have not done so, you should explore this.... some possible exemptions.......

Required care of a loved one disrupts your ability to pay living expenses

Or

Marketplace plans are unaffordable

Or

Experience some hardship in obtaining health insurance.

THERE ARE MORE EXEMPTIONS.  Have a look.

 

2018 20% Pass-through Deduction

MUCH CONFUSION NOW!
In general the new tax law allows self-employed and owners of pass-through entities (partnerships and S Corps) to deduct 20% of "qualified business income".
 
The law is COMPLEX with limitations, exceptions and undefined terms.
 
Needs to define "qualified business income" more clearly.  Specified service entities are subject to high income limitations.  There is an issue wit tiered entities and whether or not Schedule E rental income is "qualified business income".
 
Expect guidance (hopefully clear guidance) late this year 2018.
 
 

2020 Efile Personal Tax Start Date is Feb 12, 2021

The opening day for filing 2020 individual returns electronically is scheduled for Monday, February 12, 2021, see IR-2021-16, which explains the February 12, 2021 start date for individual tax return filers allows the IRS time to do additional programming and testing of IRS systems following the December 27, 2020 Consolidated Appropriations Act (H.R. 133) tax law changes that provided a second round of Economic Impact Payments (EIP 2) and other benefits.