After almost a year, I’m back on the blog. Heading into the third pandemic-affected filing season, much has changed here at Tax Therapy.

First, I am working from home for the foreseeable future. That means the practice has transitioned from mostly office-based to mostly virtual. The only clients I will be seeing in person are those who qualify for a house call. I am still taking paper documents through the mail or, if you are in the Albuquerque area, by local courier. If you are a potential client please continue to browse the website and then, if you feel like I can meet your return preparation needs, click here to book a discovery call.

Second, I am (for the most part) now working solo. Cat has a new full-time job and will be helping as necessary to wrangle actual, and occasionally electronic, documents, but she will not be here to provide near instant answers to your phone calls and e-mails. Please allow 24-48 hours for a response and understand that during March it can take me up to 72 hours to respond to your inquiries.

Third, while I am currently accepting new clients, I am only accepting new 1040 clients (individual returns). I will not accept new clients who require entity returns (Forms 1065 or 1120-S) once filing season has started. Entity returns are much more complicated and the new client onboarding process is much too involved for one person working alone to attempt during tax season. Entity returns also have a March 15th deadline and I don’t feel that I can realistically meet that deadline for entity clients who are brand new in January. If you are interested in having me prepare your entity return, I encourage you to use the contact form to let me know and I will put you on a list of potential clients to contact later this year (typically starting in June).

Finally, my cutoff date for accepting new clients will likely be even earlier this year than it was last year. Last year I stopped accepting new clients on March 10th. This year I expect to stop accepting new clients as early as February 20th to ensure that I can manage my workload and meet the April 18th filing deadline for as many clients as possible. I have not yet decided whether or not I will be taking new clients during the summer and fall extension period. As Magic 8-ball says “signs point to no” but I reserve the right to change my mind.

Everyone (the IRS, the National Taxpayer Advocate, tax industry organizations, and tax professionals) are predicting another “hairy” filing season. Personally, I’m feeling a return to something resembling normal but I am also preparing for a bumpy ride. So put on your seatbelts and let’s get going!

Image shows the car referred to in the post.

1972 Mercedes in the Nevada desert.

 

And not all tax people are interchangeable.

This is my Dad’s car. Imagine that this car is having an, as yet unidentified, engine problem. Here’s a short list of items that make this car special:

  • It’s old
  • It’s foreign (specifically German as opposed to Japanese)
  • It’s considered a “performance” or “sports” car
  • It was manufactured for sale in 1970s California (in other words, specialized emissions equipment)

My dad lives in a town with maybe one professional mechanic and a lot of hobby mechanics. Many of the hobby mechanics are pretty good mechanics, at least when it comes to cars they know. Many of the hobby mechanics have access to the internet and are willing to do their research and ask other mechanics questions. So, what’s the best option here? Put this classic car into the hands of a hobby mechanic? Take it to the local pro who works mostly on Fords and Toyotas? Or actually get it on a trailer and take it to someone who is a recognized specialist in this type of car? Maybe someone who was trained by someone who was a mechanic in California in the 1970s and who now specializes in vintage German cars? I guess it depends on how much you value your money, your time, and your car.

What does this have to do with taxes you ask? Well, I’m seeing a lot of hobby mechanics holding themselves out as professional mechanics and working on cars they have no business working on. Cars they can really damage but the owner won’t know it for the first several thousand miles. I’m seeing brand new tax professionals asking questions on Facebook about changing entity selections, about foreign tax issues, about complex individual and business tax planning when they are simultaneously asking questions that make it clear they don’t understand the difference between federal income tax withholding and FICA withholding. It’s as a friend of mine put it “horrifying.”

Even professional mechanics don’t know everything about every car. It is the same with #taxpros. Those who specialize are great at what they do but may only have a basic knowledge of other areas that also may require specialization. Understand that when you are shopping for a professional to prepare your return you may be getting a hobby mechanic instead of a professional mechanic. You may be getting a professional mechanic (#taxpro) who specializes in Ford F-150s instead of vintage, foreign, diesel engines and your car (tax return) is a 1971 Peugeot diesel. Maybe the mechanic can work on your car but should the mechanic work on your car or refer you to the specialist across town? One hopes an ethical mechanic will either decide the problem is only slightly outside their scope of competence and they have resources (other mechanics and the internet) with whom they can consult or send you on down the road. But what if they don’t? What if by the time you find out that your engine is damaged (that you’ve received the first IRS notice) you are already looking at sinking quite a bit of time and money into undoing the damage? What if indeed.

If you wouldn’t turn your car over to a hobby mechanic, why are you shopping for a #taxpro based on price, fast turnaround, and/or location?

When it comes to hiring someone to “do your taxes” choose wisely. The consequences of failure can be high (and expensive).

Read more about How to Choose a Tax Professional here.

They’re coming! Payments are supposed to start “within the next three weeks.” As to exactly what that means, your guess is probably not much better than mine. If you filed a 2018 and/or 2019 tax return and got a refund via direct deposit, your payment will be the first to be rolled out and you don’t have to do anything except wait for it to hit your bank account. But here’s what I know with respect to non-filers and everything else…

  • If you are below the threshold for needing to file a tax return and receive Social Security Benefits you will not have to do anything else to receive your payment. It will be automatically posted to the bank account where your receive your Social Security payments.
  • If you are below the filing threshold but don’t receive Social Security Benefits you may need to file a “simple” return or possibly a “zero” return. The details of what exactly these returns are and how the IRS wants to accomplish this are not available yet. But this situation will most likely apply to people receiving VA benefits and Social Security Disability payments. Neither of those types of payments are processed through the “regular” Social Security system. Update: Per Eva Rosenberg, the Tax Mama, “All software companies received guidance today (April 6, 2020) for filing returns with $0 tax liability.” Nothing is live yet, but the tax practitioner community will be ready when it is. I expect that low-income taxpayers will be provided with instructions on how to do this via the IRS free-file system. I’ll do a post once I’m sure everything is up and running as well.
  • The most important thing to know is that you will not have to pay a return preparer or anyone else to get your EIP! The scammers will be out en masse for this one as will unscrupulous preparers who want to charge you $$$ to ensure you get your payment. I will post an update when I get confirmed information as to how to file for your payment or you can periodically check irs.gov/coronavirus to get information straight from the source! In the meantime, do not respond to calls or e-mails from people offering to help you get your payment! We are supposed to be receiving information on where to report the bad actors, but for obvious reasons, that’s taking a back seat to getting those payments processed.
  • If you did not get a refund (if you had a balance due) then the IRS does not have your direct deposit amount on file. Paper checks may take up to 5 months to arrive! In theory, 1) the IRS will start mailing paper checks in May and 2) they are working on an app similar to the “Where’s My Refund” App that would allow you to enter direct deposit information if you prefer to do that rather than to receive a paper check. The latest information I read said that this app would be ready by late April or early May. So I would expect that they will wait to start issuing paper checks until people have had a chance to opt-in to direct deposit via the app. That means if the app is late, the paper checks will be even later. Again, I will post updates as soon as I have reliable information or you can follow along at irs.gov/coronavirus to get information as they update it.
  • If the IRS is mailing you a check they may not have your most recent address. Or perhaps you no longer have the account where your most recent refund was direct deposited. Former Taxpayer Advocate, Nina Olson, talks about her concerns with the implementation issues here. Not much we can do right now except to be aware of the potential bumps in the road that could delay your payment. It is really important not to call the IRS to ask about the amount of your payment or when to expect it. They are doing their best to continue to process 2019 returns, issue refunds, continue to work on other taxpayer issues, and to implement this new law. All with many staff working from home and many simply furloughed.
  • The additional $500 credit for “dependents” is for dependents who would qualify for the Child Tax Credit in 2020. That means children who turn 17 in 2020 do not qualify. At this time it is unclear if the system will be attempting to calculate payments based on your dependent child/children’s projected age in 2020. In other words, we don’t know if they are just going to look at your 2019 (or 2018) return, see if there’s a qualifying child and give you the $500 or if they are going to “do the math” to see how old that child will be in 2020. Surprise!
  • There’s kind of a “donut hole” for adult children in college. They are still dependents on their parents’ returns but they are too old to qualify for the Child Tax Credit. So the parents don’t get $500 but the kids don’t get a $1200 stimulus payment either. Trust me, Congress and the IRS are well aware of this issue by now. Whether or not they decide to address it in future legislation remains to be seen.
  • The EIPs are not subject to “offsets” other than child support. If you are behind on your child support, this payment will go towards that. But if you are behind on your taxes, your refund will not be used to offset balances due for federal or state returns.
  • This is not taxable income! It’s an “advance” on a refundable tax credit for 2020. That means (if you are a client) we will have to reconcile the amount of your credit received with what you were supposed to get on your 2020 tax return. So please, when you get your payment write down the amount of the credit, the date you got it, and how you got it (direct deposit or by paper check in the mail). If you didn’t get enough credit, the difference will be refunded when you file your 2020 tax return. If you got too much—nothing happens.

Finally, some people are saying “well, this won’t do me much good” and have asked about donating their payments. Of course you can! Here’s a list of some of the places I like to donate (in no particular order):

I also know that New Mexico’s school districts could use some help because they weren’t ready to pay for the cost of converting everyone to remote learning. The Navajo Nation and many of the pueblos are in dire need of help as well. If you are outside of New Mexico I recommend your local food banks, schools, local PBS, local arts organizations (who may be trying to help performing artists who are out of work), and charities that support your area’s indigenous populations.

The IRS is opening e-filing for business returns soon and e-filing for individual returns will open a couple of weeks after that. Here at Tax Therapy we are about ready to open our season for new and existing clients. Existing clients will receive a reminder postcard and e-mail letting them know that they can call to request their annual tax organizer (engagement documents & client interview). New clients can call to get an organizer and set up a new client intake appointment. Please note that new clients coming in during tax season (as opposed to during the summer and fall) must pay a non-refundable deposit equal to the base price of a federal Form 1040 before we will accept their return for processing.

And it’s a doozy! Every year Kelly Phillips Erb (a.k.a. The Tax Girl) posts a list on Forbes.com of the Top 100 Must-Follow Tax Twitter Accounts. For 2020, I’m on it! Mostly this list is for tax professionals (nerds) rather than taxpayers but it is an honor to be included and as you can see, I’m really excited!

I’m also excited that tax season is basically here. I am still accepting new clients. Cat will be ready to send out preliminary paperwork starting the week of January 13th. I will start processing paperwork the following week. That is also the week I expect that the IRS will open e-filing for the 2020 tax season. So if you are looking for a #taxpro, please get in touch.