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The IRS announced on Wednesday that it is postponing the deadline for all individual tax returns. Returns otherwise due April 15 will not have to be filed until May 17 this year. The IRS says it will issue formal guidance in the near future. The postponement applies only to individual taxpayers, who can postpone their federal income tax returns and income tax payment due on April 15 until May 17, 2021. They do not have to file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, to qualify for this postponement. The IRS says taxpayers who request an extension using Form 4868 will, as usual, have until Oct. 15 to file their returns, but their tax payments will be due May 17. No interest, penalty, or addition to tax for failure to file a federal income tax return or to pay federal income taxes will accrue between April 15, 2021, and May 17, 2021, for any return or payment postponed by the announcement. The postponement does not apply to estimated income tax payments due April 15, 2021, for 2021 tax years. The postponement, as announced on Wednesday, does not apply to any other type of federal tax or to any federal information returns. In a statement, IRS Commissioner Chuck Rettig attributed the postponement to hardships taxpayers are experiencing due to the ongoing COVID-19 pandemic. However, the IRS is also having to cope with tax changes made by the American Rescue Plan Act, P.L. 117-2, enacted March 11, which included a new round of economic impact payments that the IRS must send out. The IRS recently reported that it has now sent out 90 million stimulus payments under the American Rescue Plan Act. The American Rescue Plan Act also includes changes that retroactively affect 2020 returns, including making the first $10,200 in unemployment benefits tax-free for many taxpayers. The IRS recently released informal guidance on its website for taxpayers who received unemployment benefits in 2020. The webpage includes an unemployment compensation exclusion worksheet. The IRS promises more guidance and on Saturday urged taxpayers to wait to file amended returns. Full Story: Journal of Accountancy online

The IRS plans to automatically process refunds for taxpayers who had unemployment income in 2020 and filed their tax returns before legislation passed that made those benefits tax-free. The American Rescue Plan, which was signed into law by President Joe Biden on March 11, made the first $10,200 of unemployment income tax-free for people with adjusted gross income of less than $150,000 in 2020. (The break is $20,400 for two workers in a married couple filing taxes jointly.) But by the time the law passed, in the middle of tax season, some people who received unemployment income in 2020 had already filed and paid taxes on those benefits. The IRS is working on a fix that means most people in that situation will not have to take any extra steps, such as sending in an amended tax return, to recoup the taxes they paid but don’t owe per the new rule. “Do not file an amended return at this time,” IRS Commissioner Charles Rettig said during a Thursday hearing with the House Ways and Means Committee. “We believe that we will be able to handle this on our own,” he said. “We believe that we will be able to automatically issue refunds associated with the $10,200.” Rettig said that the IRS would release more details in the coming days. New tax filing instructions People who had unemployment income in 2020 and have not yet filed their tax return may need to wait to ensure that they submit all information to the IRS correctly. The agency on Friday released new instructions, including a worksheet for paper filers, and said it would work with online tax programs to update current software. Taxpayers have additional time to sort out and file their taxes this year. The IRS recently pushed the tax filing deadline for individual taxpayers to May 17 from April 15. That extension only applies to individual returns, however, and not to estimated tax payments or corporate taxes, which are still due April 15. Rettig said that the deadline was pushed only for individuals to help the most vulnerable taxpayers during a complicated tax season. He also said that, going forward, extensions of the tax-filing season cannot become a pattern. The IRS had received more than 66 million tax returns as of March 13, according to the agency, a 13.3% drop from the same time last year. So far, 42.5 million refunds have been sent to taxpayers, about a 28% decline from 2020.

The U.S. Treasury Department and the IRS announced on March 17, 2021 that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021 to May 17, 2021. The federal tax filing deadline postponement to May 17, 2021 only applies to individual federal income tax returns and tax payments otherwise due April 15, 2021. Note that relief does not apply to estimated tax payments that are due on April 15, 2021. States issue separate guidance regarding any potential due date changes and do not always comply with federal updates. 36 states have extended 2020 tax filing and payment deadlines to May 17, 2021 • Arkansas announced that it will waive the requirement for a written request for an extension to file an individual income tax return for the duration of the emergency. It also will extend the state tax filing and payment deadline for individuals to May 17, 2021. Further, the extension also applies to 2020 S corporation, fiduciary and estate, partnership and composite returns. • California announced it will extend the state tax filing and payment deadline for individuals to May 17, 2021. The extension does not apply to estimated tax payments due April 15, 2021. • Connecticut announced it will extend the state tax filing and payment deadline for individuals to May 17, 2021. The extension does not apply to estimated tax payments as outlined in FAQS. • Colorado announced that the 2020 individual income tax payment and filing deadline has been extended to May 17, 2021. Penalties and interest, regardless of the amount owed, will not be assessed if paid by the extended due date. The extension does not apply to estimated payments for the 2021 income tax year due on April 15, 2021. • The District of Columbia extended automatically the deadline to file and pay all income tax returns until May 17, 2021. This extension applies to all D-20, D-30, D-40, standalone Schedule H, D-41, D-40B and D-65 tax filers, and includes combined return filers. The extension does not apply to estimated tax payments due April 15, 2021. • Delaware announced that personal income tax returns, including composite returns, originally due on April 30, 2021, will now be due on May 17, 2021. The extension does not extend to estimated payments for the 2021 tax year, which remain due on April 30, 2021 and cannot be extended. • Georgia announced it will extend the 2020 state individual tax filing and payment deadline to May 17, 2021. The extension does not apply to 2021 estimated tax payments due April 15, 2021. • Illinois extended the 2020 state tax filing and payment deadline for individuals to May 17, 2021. The extension does not apply to 2021 estimated tax payments due April 15, 2021. • Idaho announced that it has extended the 2020 income tax filing and payment deadlines from April 15, 2021 to May 17, 2021. This relief applies to all taxpayers subject to Idaho’s individual income tax (i.e., individuals, trusts and estates) regardless of the amount owed. Penalties and interest will not be assessed if taxpayers file their return and pay the respective income taxes by May 17, 2021. The legislature is also expected to pass a bill to incorporate this change. • Indiana announced that it will extend individual tax returns and payments, originally due by April 15, 2021, to now be due on or before May 17, 2021. All other tax return filings and payment due dates remain unchanged. • Kansas announced the extension of the state tax filing and payment deadline for individual returns, as well as for 2020 fiduciary income tax returns, to May 17, 2021. If the balance due is paid on or before May 17, 2021, no penalty or interest will be imposed. The extension does not apply to 2021 estimated tax payments due April 15, 2021. • Kentucky extended the 2020 state tax filing and payment deadline for individuals to May 17, 2021. The extension does not apply to 2021 estimated tax payments due April 15, 2021. • Massachusetts extended the of time for individuals to file and pay 2020 returns and taxes otherwise due April 15, 2021 to May 17, 2021. The extension does not apply to 2021 estimated tax payments. • Maine announced that the filing and payment deadline for Maine 2020 individual income taxes is extended from April 15, 2021 to May 17, 2021. The extended deadline does not apply to estimated tax payments; the due date for those remains April 15, 2021. • Michigan extended the 2020 state individual and composite tax filing and payment deadline from April 15, 2021 to May 17, 2021. First quarter estimates for tax year 2021 remain due on April 15, 2021. Penalty and interest for late filing of the return and late payment of 2020 tax will begin to accrue for most individuals on May 18, 2021. • Minnesota announced it was granting a grace period for taxpayers filing their 2020 individual income tax returns. Those taxpayers now have until May 17, 2021 to file and make their payments without any penalty or interest. This grace period does not include individual 2021 estimated tax payments. • Mississippi extended the due date for 2020 individual income tax returns to May 17, 2021. Any tax due should be paid on or before May 17, 2021 to avoid penalty and interest. • Missouri announced it is extending the 2020 state individual tax filing and payment deadline from April 15, 2021 to May 17, 2021. The relief does not apply to estimated tax payments that are due on April 15, 2021. • Montana extended the filing and payment deadlines for 2020 individual income tax returns to May 17, 2021. Deadlines for quarterly estimated payments of 2021 income taxes have not changed. • Nebraska announced the 2020 state individual tax filing and payment deadline from April 15, 2021 to May 17, 2021. First quarter estimates for tax year 2021 remain due on

(CNN) – The Internal Revenue Service is on track to start sending stimulus-enhanced child tax credits to millions of families in July, the agency’s head said Tuesday. The upbeat prediction from IRS Commissioner Charles Rettig was a notable change from his more hesitant assessment last month, when he told a House subcommittee that the agency might not meet the deadline imposed by the Democrats’ $1.9 trillion relief package.”We fully expect to launch in July. We expect to launch with payments going out on a monthly basis,” Rettig said at a Senate Finance Committee hearing. The agency intends to debut an online portal on July 1 to allow it to send the child tax credit to families periodically this year, instead of as a lump sum at tax time, Rettig said. They can use the portal to inform the IRS of any changes to their households in 2021 or to opt out of monthly payments. However, he acknowledged the portal might need some upgrades after it’s unveiled, noting that it will be “the absolute best product we are able to put together.” “It is going to be as user-friendly as possible,” Rettig said, noting that other IRS portals were enhanced in the months after launch. The world is watching as the Biden administration takes office.Get updates on US politics delivered to your inbox daily. There will be a “moderately significant” authentication process and “certain levels” of verification required, he said. The agency will monitor the portal to check if people are having difficulty using it.Families who don’t have access to broadband internet service can use paper forms or visit an IRS office, he said. Only a few weeks ago, Rettig told House lawmakers that the agency is struggling to juggle the traditional tax season, the $1,400 stimulus payments and the other demands that the Democrats’ massive new relief package has placed on it. The roughly one-month tax filing extension further shortened the time that the IRS can devote to creating the child tax credit portal, he said at the time, adding that “it might be a challenge to get into monthly [payments] right out of the box.” What the stimulus offers parents For this year, families can receive a credit of $3,600 for each child under 6 and $3,000 for each one under age 18, up from the current credit of up to $2,000 per child under age 17. The enhanced portion of the credit will be available for single parents with annual incomes up to $75,000 and joint filers making up to $150,000 a year. The tax credit will become fully refundable so that more low-income parents can take advantage of it. Until now, it has only been partially refundable — leaving more than 20 million children unable to get the full credit because their families’ incomes are too low.Lawmakers also wanted to make it easier for parents to use the funds to cover their expenses during the year. So the law calls for sending families half the credit on a monthly or periodic basis, from July through December. The other half would be claimed on their 2021 tax returns.President Joe Biden and Democrats are already pushing to make the changes to the child tax credit permanent, rather than just for 2021. A challenging year The agency started the year already behind. It still has 1.7 million tax year 2019 returns to be processed. Many IRS workers were sent to work from home during the pandemic, leading to a backlog of paper returns. At one point last year, the pile up of unopened mail had to be kept in trailers.In addition to sending out three rounds of stimulus payments over the past year, the most recent Covid relief package made changes to the tax code in the middle of filing season. In addition to the enhancements to the child tax credit, the law waived income taxes on up to $10,200 in unemployment compensation received in 2020, helping some laid-off workers who faced surprise tax bills on their jobless benefits. The changes create work for the IRS, tax preparers and taxpayers. Facing pressure from lawmakers, the agency recently extended the federal tax filing deadline to May 17.Meanwhile, the agency is handling all the additional work with a budget that’s about 20% less than it was a decade ago, leaving it with antiquated technology and a smaller staff. Biden asked Congress last week to increase the IRS’ budget by $1.2 billion, or more than 10%, higher than the enacted level for this year. Still, the 2021 filing season is going smoothly, Rettig said. The IRS has received more than 93 million individual federal tax returns and issued more than 62 million refunds totaling more than $180 billion, as of April 2. It has also delivered about 156 million third-round stimulus payments totaling about $372 billion.

Questions to Ask When Hiring A CPA | Over the last few weeks I have been asked more and more frequently about hiring a CPA. After working with many tax professionals over the last year ranging from a guy who resulted in me owing the IRS $3,000 for money he claimed fraudulently and had paid to his personal bank account…to the fantastic Brandyn Cox of BMC Accounting who I use now! In the middle I have used a few decent CPA’s and tax professionals, and learned what I like (and dislike) t to see when hiring a CPA. When Should You Hire A Tax Professional? There are two ways to answer this question, in lifecycle, and time of year. Lifecycle You should begin looking for a tax professional as soon as you have more to claim than your normal W2 salary. Most young service members are completely safe going with the free services on base, but the moment you add real estate income, dividend income, stock profits, short-term capital gains, and/or business revenue into the mix you need to find a professional. Also, if you just hate the process of filing taxes, or put it off until the last possible moment, go ahead and hire somebody to do it for you. Time of Year This is important and often overlooked by people. January through April/May is the busiest time of year for tax professionals. This is absolutely the wrong time to begin hiring somebody to prepare your taxes. My personal tax professional was so slammed at the beginning of this year that he stopped taking on new clients. Not only that, but no tax preparer who is actually worth a shit is going to have the spare time to let you interview them during tax season. For these reasons you need to begin hunting for a tax professional during the summer or fall of the year before you need them. This will ensure you can find the best tax professional for your situation with plenty of time to get familiar with each other prior to tax season. This will also ensure they have factored your return into their workload, and you won’t get turned away.

Editor: Heidi A. Ridgeway, CPA Tax issues are the most common source of malpractice claims against CPA firms, accounting for 72% of total claims in 2016, according to CNA Financial Corporation, the carrier for the AICPA’s professional liability insurance program. Common reasons for those claims often include issues that arise from misunderstandings between firms and their clients. According to CNA Financial and discussions with Kevin M. Murphy, partner and managing attorney at Carr Maloney PC, during the AICPA Tax Practice Responsibilities Committee meeting on May 9, 2018, among those reasons are: Failure to advise clients or providing improper advice; Filing errors such as late elections, underreporting revenue, overstating deductions, and math and clerical errors; Errors related to specific transactions such as Sec. 1031 exchanges and mergers and acquisitions; Defalcations by client personnel; Conflict claims in divorces or business separations; Tax return identity theft; Actions against a CPA or firm by a state board or other agency; Lack of disclosure when there is a questionable basis for a deduction; and Foreign asset disclosure forms (e.g., FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR)). Failure to advise clients (or providing improper advice) is the most frequent cause of claims in the AICPA Professional Liability Insurance Program. Often, these disputes are a result of scope-of-service disagreements between firms and their clients. Engagement letters are the first and most critical line of defense against scope-of-service claims, helping to prevent claims by establishing clear responsibilities and managing client expectations as well as defending against claims by defining the scope of services and establishing limitations on the services to be provided to a client. Using engagement letters is also associated with reducing the severity, i.e., the dollar amount, of claims (see Ference, “Professional Liability Spotlight: Setting Expectations,” 224-4 Journal of Accountancy 16 (October 2017)). Unfortunately, small firms and sole practitioners are the least likely to regularly use engagement letters (id.). While firms may be reluctant to send multiple-page engagement letters to clients (the sample AICPA letter for individual clients is eight pages, with an additional eight-page addendum of terms and documents) and may have difficulty getting clients to sign and return the letters, best practice standards in Section 10.33 of Circular 230, Regulations Governing Practice Before the Internal Revenue Service (31 C.F.R. Part 10), require “[c]ommunicating clearly with the client regarding the terms of the engagement.” Limiting scope of service with engagement letters Engagement letters should be used to limit the scope of services by specifying the returns and other services for which the firm is responsible. It is just as important to specify the services for which the firm is not responsible. For example, a firm may want to include language regarding whether bookkeeping services required to prepare a tax return are included in the engagement, or whether the firm will prepare partner or shareholder basis schedules as part of an engagement. Firms should generally exclude from a compliance engagement any tax consulting and tax planning, as well as correspondence with taxing authorities, and use separate letters for those services if a client requests them. Care should be taken to specify the client taxpayer or taxpayers to which the engagement services are being provided, particularly if an individual taxpayer has an ownership interest in business entities or trusts. Separate letters should be used for business engagements and individual engagements, as well as for adult children of clients, and should specifically include or exclude filing responsibilities for minor children. Model engagement letters available to AICPA Tax Section members (available at www.aicpa.org as part of the Annual Tax Compliance Kit) suggest specifically noting not only which federal and state returns will be prepared as part of the engagement but also the specific tax years involved. Using form numbers and years (e.g., “2018 Form 1040 and applicable schedules”) is an effective way to clearly articulate the firm’s responsibilities. Responsibility for filing the returns and the subsequent termination of the engagement should also be discussed in the letter. For electronically filed returns, language should typically specify that firm responsibilities end with the electronic filing of the return (and subsequent acknowledgment by the taxing authorities). For paper-filed returns, it is critical to note whether the client or the firm is responsible for mailing the returns. Firms should avoid using engagement letters that do not require a client’s signature but instead specify an automatic acceptance by a client when a client provides tax information to the firm. Instead, engagement letters should be updated and signed by clients annually. This is important in limiting potential liability resulting from clients’ allegations of continuous representation by a firm. Annual letters also are beneficial in starting the running of the statute of limitation for claims. State, local, and international filing obligations For state and local tax returns, engagement letters should list the state and local income tax returns to be prepared and whether the engagement includes other non-income-based taxes (e.g., excise, franchise, or sales and use tax) that may be due. Letters should specifically list which state returns and form numbers are included in an engagement rather than just saying “all required state returns.” With the inherent difficulties in determining state tax nexus and filing requirements for clients, firms should consider language that puts the onus on the client to determine state and local filing obligations rather than on the firm. If clients want the firm to undertake a nexus study to determine return filing obligations, a separate engagement letter should be used to specify those services. Likewise, an engagement letter should specify responsibility for determining filing requirements for non-U.S. returns and, unless otherwise agreed to, exclude foreign filing obligations from the scope of the engagement. Filing obligations related to foreign financial assets Engagement letters should note that individual clients are responsible for reporting the values of certain foreign financial assets as part of their tax reporting obligations and that they may need to file Form 8938, Statement of Specified Foreign Financial Assets, with Form 1040, U.S. Individual Income Tax Return,