We (the tax community) were expecting something last Wednesday. “Something” passed the House Monday and the Senate yesterday and the President was expected to sign. He didn’t. I still expect that individual taxpayers will be receiving a second round of economic impact payments but when and how much remains a mystery. If you want to read an excellent summary of what’s going on and why some of the proposed fixes look good on paper but are maybe not so realistic you can do no better than this article by The Tax Girl.

In the meantime, do the #taxpro community a favor. Don’t call or e-mail your tax professional with questions about the stimulus money. We don’t know. And many of us do mass updates (via e-mail, blog posts, etc.) but we haven’t done one yet because—we don’t know. We’re all trying hard to both prepare for the upcoming filing season and maybe enjoy some holiday time with our families. We’ll let you know as soon as we know. You can count on that!

This one is mainly for all my new friends in Facebook’s Tax 101 group (especially the people who are new to flying solo). Still, it is good advice for most business owners and just regular people too although not all of it may apply to your particular situation.

  1. Change your passwords annually. Change the login passwords on your work machine and those for your critical cloud services (tax software, accounting software, client management software, etc.) and use long passphrases (at least 16 characters) where possible. Don’t want to keep track? Consider a password manager such as Last Pass (not an endorsement, just a suggestion). Here are a couple you might not think about—change the password on your router and your WiFi login (or ask your IT person to do it). Your router/modem are the gateway to your computers. My router has the password on a sticker on the side—of course I changed that. And then I change it annually as part of my office security protocols.
  2. And speaking of your WiFi...use the strongest password encryption your modem allows and stop broadcasting your SSID. Your SSID is your network identifier. It lets people “see” the available networks in the area. You’re a tax shop. Don’t broadcast your network to any rando who’s driving around the neighborhood.
  3. Add multi-factor authentication to anything that allows it. That way even if your passwords are compromised whichever baddie ends up with them will also have to have your phone or your e-mail account credentials or something else to get into your cloud accounts.
  4. Purge old files. Paper and electronic files. I’ve heard #taxpros bragging that they have a copy of every return they’ve ever done. Either on a drive somewhere or in a file cabinet (the horror!). You know what that does? It increases your exposure in the event of a data breach by an order of magnitude. Data breaches aren’t all electronic. What happens if your files are on paper and angry burglars bust up your file cabinets and send those papers flying down the street (happened with my Aunt’s personal paperwork—not fun). Do you really want to have to pay for ID theft protection for a client from five years ago if they aren’t still a client? Do you really want to have to notify clients who are long gone in the event of a breach. Make a purge plan part of your written information security plan (WISP)—you do have a WISP, right? You are required to have one if you get paid to prepare tax returns.
  5. Update your virus software and run a deep scan of your computer hardware. I recommend doing this at least quarterly, but you definitely want to do it before the clients come knocking this filing season.
  6. Encrypt your hard drives and flash drives, especially any drives that can be lost or stolen easily (so flash drives, removable storage, laptop HDDs).
  7. Turn off your machines! Now, this is more practical for some people than others, but basically if a machine is on and visible (see Tip #1) people can try to break into it. You can’t break into a machine that is off. Sure, you can set “time out” times for devices on your router (and you should). Turning the machines off if you really don’t require them to be on 24/7 just adds an extra layer of protection. I even unplug my router if I’m going to be away from the office more than a couple of days.
  8. Implement a “clean desk” policy. For those of you who are fully paperless, the Windows + L key is your friend (it locks your screen immediately). If you aren’t paperless, be sure that if you step away from your desk or leave for the evening that client information is not easily accessible to anyone who might have to come into the office. I mean, my landlord is allowed to enter my office during a building emergency. I don’t want them seeing my stuff!
  9. Consider (or reconsider) how you are collecting and storing your clients’ personally identifying information. Many amazing applications allow you to conveniently collect all sorts of client data with only a click or two. But you need to know if what you are using is secure. Does it encrypt the data? Is that data passed through or stored somewhere in the cloud? What happens if the company who owns/runs the application has a breach? Are you liable? To what extent? Who knows?! Certain information I simply will not collect using a web-based form because I don’t know enough to answer those questions. You need to decide for yourself and your firm where the line is between automation/convenience and security. And, like all things tax, “it depends”. It’s going to depend on the size/volume of clients your firm handles. It’s going to depend on your risk tolerance. Technology is wonderful and can help us all become more profitable, but it’s important to use it mindfully.
  10. Remember there are three basic types of security: cyber security, physical security, and operations security. Most of these tips are cyber and physical. Operations security is looking at your office processes and procedures and your staff and ensuring that your processes/procedures keep your office secure and that your staff is trained and not actively or inadvertently compromising your well thought out procedures by their actions.

Good #taxpros don’t rely on luck to keep information safe. Security is an active process! Stay active in the new year!

Remember when they were doing direct deposit or mailing a paper check? Well someone convinced someone that prepaid debit cards were a better idea. I won’t wax philosophical on the fact that you can’t usually pay rent with a debit card. Instead, I will link to this article from The Tax Girl letting you know that debit card is legit…so don’t throw it away!

Remember when I talked about college students who are dependents (or basically any child over 16) not being eligible for the dependent EIP or their own EIP? Well, that applies to adult dependents too. So if you’re claiming your parent as a dependent and they are wondering where their stimulus money is—it isn’t coming. Because they are a dependent over the age of 16. Yeah—this is a drag.

What’s not a drag is that I have been moving through the returns and Cat may be coming back part time starting next week. Can I get a hallelujah?!

And we are open by appointment for document drop off, return review and signature, and for new client intake appointments.

That’s about it for today!

It’s Thursday and, after a fairly productive start to the week and a really hectic Wednesday, I am working from home. I have a 2-hour class today and I also needed to catch up on reading and administrative tasks.

The tax returns, however, keep on trucking. I’ll be back in the office tomorrow (Friday) working on returns. I’m still at the pile that came in in mid-March, which (if you have been keeping up with this blog) is most of them. But I’m finally seeing light at the end of the tunnel! I still expect to get most of the returns that normally would not have been on extension filed by the end of this month.

I am still planning on opening the office by appointment only beginning Tuesday afternoon, May 19th. I have already booked a few appointments so if you are wanting an appointment in May (and not in June) it’s best to call or e-mail and book now.

You can also call or e-mail if you are a client with a question about your Economic Impact Payment. I’ve been answering those as I can and I appreciate everyone’s understanding concerning the fact that while I have a lot of information on the process, I have absolutely no control over the IRS, the Treasury Department, or their tools (electronic or human).

I am still urging everyone to stay home to the greatest extent possible and to use e-mail, the phone, Zoom, the secure portal, or USPS/courier to communicate with me.

Enjoy your weekend everyone!

#fullambo out

Wow! That’s all I can say. This blog post is late because I have managed to string together three productive work days in a row and it feels like it’s gonna hold through the rest of the week!

So, where are we at? Unfortunately we are still in early to mid-March as far as return processing goes. That said, Cat is coming to pick up the last pile of returns for scanning this week and I am moving through the piles. I am still fiddling with some of the more complicated returns but I’m working on those in tandem with some of the more straightforward ones. The short version is, returns are getting finished.

This is the first time this year I have felt like tax season is working. The first time I have felt like it’s actually tax season and things are working the way they are supposed to—stacked up but moving.

I will be working on returns the rest of this week and back in and working next week as well. I don’t have Cat available for data entry right now (she can’t do that from home) but if you’ve been with me any length of time you know how fast I type. I’ll get ’em done. Have a great week and enjoy the weekend.

#fullambo out

 

In case you missed the memo, NM Governor Michelle Lujan Grisham (a.k.a. Notorious MLG), has extended the stay-at-home order through May 15th. Cat and I are going to continue to honor that by Cat staying at home. That means no phone support for me. That means leave a message! I am usually at the office (although I will admit that “gardener’s hours” are starting to kick in) and I stop work to pick up phone messages a few times a day.

The backlog is slowly clearing. That means, for those of you whose returns still haven’t made it into the office, we will be ready to start accepting new paperwork soon. So here’s the plan—

Whether or not the stay-at-home is extended beyond May 15th, I will re-open the office for document drop offs by appointment only on Tuesday, May 19th. My 24th wedding anniversary is Monday the 18th so I’ll probably take that day off. If you wish to make an appointment to drop off your tax return documents or missing paperwork (K1s, corrected broker 1099s, etc.), please just call or e-mail and I or Cat will get back to you and will set you up!

I will probably re-open the office to new clients at the beginning of June. We will still be, to the greatest extent possible or required, limiting in-person visits to the office. Re-opening to new clients simply means that I will once again be accepting inquiries from new clients. So, if you know anyone who hasn’t filed but wants to, June is when I’ll be accepting referrals again. That should be plenty of time to meet the July 15th filing deadline.

Thanks to all of you for hanging in there through this chaotic tax season with me!

#fullambo out

OK! Still feeling like I’ve turned a corner. Getting returns processed. Cat is finding her “work at home” groove too. We are moving slowly through the stacks that have been here since mid-March when all hell broke loose. I am still having to set aside some of the more complex ones for when I am able to fully focus. When it comes to tax returns it’s a lot harder to fix them than it is to just get them right the first time. So I want to make sure I’m in top form when I’m working on the ones with a lot of moving parts (you know who you are).

If you still haven’t gotten your stuff into the office, that’s OK! Once I feel like most of the backlog has been cleared I will get a bit more pro-active about getting what remains out into the office. I’m hoping that this will roughly coincide with at least a lightening of some of the stay-at-home restrictions. We will see—that’s going to depend both on how quickly I work and how well we do at flattening the curve here in NM.

Again, we’ve got until July 15th and I’m planning on having most of them out well before then unless additional chaos ensues.

Thanks for hanging in there with us!

#fullambo out

Economic Impact Payments

I got mine. So I can answer one question—no, the IRS is not going to “do the math” to see if your dependent child who was eligible for the Child Tax Credit (CTC) in 2018 or 2019 is going to be eligible in 2020. You will get the additional $500 payment if the child was CTC eligible (age 16 or under) on your most recently filed return. Every now and then my procrastination pays off. I’m pretty sure I’ll be filing my personal 1040 on July 14th.

Moving forward, and I am advising individual clients as their returns are prepared, I will be either filing immediately or recommending that you wait until you receive your Economic Impact Payment (EIP or ‘stimulus check’) to file your 2019 return. The recommendation will be based on whatever is most advantageous for you. I have already advised some clients whose income was higher in 2019 than it was in 2018 to wait to file their 2019 return until they receive their EIP. I’ll be doing the same for clients with kids who were 16 in 2018. It’s called “tax planning” and it’s one of the reasons you pay a #taxpro.

Non-filers (you aren’t required to file a return, not that you simply haven’t filed a return)

If you aren’t a client, or if you are a former client who dropped below the threshold for having to file a return, you have a couple of options depending on your individual circumstances:

It is important to remember that you should, under no circumstances, have to pay to receive your EIP. For best results always start at irs.gov or irs.gov/coronavirus, not Google. And watch out for phone calls and e-mails phishing for information as well. The scammers are out in force on this one.

Filers Who May Not Have Direct Deposit Information on File or Want to Update Their Direct Deposit information

According to Kelly Phillips Erb (aka The Tax Girl) in this Forbes article, the Treasury Department has created a new web tool for filers of 2018 or 2019 tax returns to input or update their direct deposit information (a whole two days before the #taxpro community expected it!). This tool can be used if you normally don’t get a refund, but rather, have to pay the IRS each tax season. You can use this tool to verify the amount of your EIP, confirm whether it will be direct deposit or check, and (if you are getting a paper check) enter direct deposit information to receive your payment more quickly as long as your check hasn’t already been mailed. Paper checks aren’t supposed to start being mailed until the end of this month or early May according to my most recent reading. You can also update your direct deposit information if your deposit isn’t already pending.

You need to have your most recently filed tax return in hand to answer some of the questions. If I prepared your return it is likely that the information the tool will be requesting will be on your COMPARE sheet (that handy three-year comparison that is usually at or near the top of the left-hand pocket of your tax folder).

Update! Word on the street (OK, on #TaxTwitter) is that the tool is not working correctly. Especially if you have not filed a 2019 return. Please be patient and check back once or twice a day. They will get it running eventually. Or I’ll post that they’ve scrapped it.

Finally, according to The Tax Girl:

For security reasons, the IRS plans to mail a letter about the economic impact payment to your last known address within 15 days after the payment is paid. The letter will provide information on how the payment was made and how to report any failure to receive the payment.

Based on my reading there are a host of complicating factors for economically vulnerable taxpayers, taxpayers who file injured spouse claims (one taxpayer of a married filing joint couple owes back child support and the other doesn’t), divorced taxpayers, etc. I’m not going to go into the weeds on those. If you are interested, I highly recommend the Procedurally Taxing Blog, but beware, the blog is written for tax attorneys and is not for the faint of heart. Nevertheless, several recent posts discuss some of the complicating factors in mostly plain language.

And that, taxpayers, is all I have to say about that. So, moving on…

Deadlines

As I already reported, the filing and payment deadline has been extended to July 15th. Pretty much all of the deadlines significant to my practice (including those for filing Tax Court petitions) have been extended. If you have to file an FBAR you have an automatic extension until October 15th. The good news is that the IRS recently clarified that the July 15th deadline specifically applied to taxpayers required to file a Form 8938 (for certain taxpayers with foreign bank account balances). Estate income tax returns as well as estate and gift wealth transfer tax returns have also, for the most part, been granted extended deadlines.

The one tiny bit that was still weird has also been fixed! All of the extensions resulted in Quarter 1 estimated tax payments being due after Quarter 2 payments were due. Until recently Quarter 1 payments were due on July 15th but Quarter 2 payments were still due on June 15th. That has been fixed. Now all balances due on 2019 returns as well as Quarter 1 and Quarter 2 estimated tax payments are due on July 15th (as of this writing). That’s good news and bad news. Yes, everyone has more time, but that does make it easier to forget about payments and to, perhaps, lose sight of just how much will be due in total on July 15, 2020. Consequently, I am encouraging all taxpayers with the means to do so to make their payments on time and/or to set calendar reminders with amounts due to ensure that those payments get made by the new deadline.

And speaking of payments…

Installment Agreements

If you are in an existing Installment Agreement with the IRS your payments have also been suspended. If you mail them a check, you can stop until July 15th. If you are in a direct debit agreement you need to contact your bank and ask them to suspend the payments temporarily. It is extremely important that you ensure that you direct the bank to reinstate your payments approximately two weeks before the first payment due after July 15th to ensure that you don’t default your agreement. I expect the IRS to be fairly graceful about this given the circumstances, but it’s always better not to count on that grace. And again, if the payments are not causing economic hardship, I certainly recommend that you continue to make them even though you don’t have to.

Student Loan Payments and Interest

One thing that I have not mentioned that was included in the CARES Act is that the Act suspends student loan payments through September 30, 2020. Both principal and interest payments are suspended with no penalty and no interest will accrue on these loans during the suspension period. So if making those payments is causing you a hardship, you can temporarily stop making them. Again, just don’t forget to start again when the suspension period ends!

That is what I know as of right now. The pace of legislation and the related relief provisions and the implementation guidance has slowed down a bit, especially for most of my clients. Larger firms and CPAs who handle larger small businesses are still getting hit pretty hard. Guidance concerning the Paycheck Protection Program loans (more on that in a future post) for partnerships and self-employed people just came out a day or two ago. I still expect that there will be more relief coming (including addressing the ‘donut hole’ for EIPs for college age dependents) but for now, the tax practitioner community is slowly catching up to the most recent batch of tax law changes and additional guidance.

Hang in there. Stay home. Stay healthy.

#fullambo out

To those of you who sent kind e-mails offering to go on extension, to wait, or simply with kind words for me and Cat, thank you.

To those of you who are sending e-mails making suggestions for how I can improve my business during this time—less than helpful. Oddly enough I’m getting these from both colleagues who know nothing about my business or my clients and from clients whose only contact with my business is once a year when I file their tax returns (and none of them are professional business coaches—I actually have one of those and listen to her). In any case, I’ve been running this business for ten years now and you might, especially if you are a W2 worker or a freelancer with one or more relatively continuous gigs, take a moment to consider that running a business with over 100 clients at any given time (down from over 200 across three offices), a physical office (three physical offices once upon a time), staff on the payroll (albeit only one right now, but there used to be six spread across the three locations), and a huge level of professional liability because of the type of work being done 1) is fundamentally different than your situation and 2) might have already involved considering your idea and deciding against it. I also have to wonder if you e-mail helpful suggestions to the other professionals with whom you work (your broker, your doctor,  your attorney, your realtor) or if you just accept that the way they are doing business is the way that it is done and/or the way it works best for them.

To those of you who have requested that we return your documents, thanks for letting me know. I understand. Cat will be picking up documents from the office twice a week and getting them in the mail.

Here’s what I’m working on this week:

  • GRT Returns/Reports for the few clients for whom I do those
  • Complex returns that have been in the office since February or early March
  • Returns that were submitted from about 3/9 through about 3/16 and possibly some others depending on the number of issues with the returns and how much follow up is required
  • Creating a blog post with further information on extended deadlines (but wait! there’s more!) and the Economic Impact Payments (stimulus checks) with (I hope) additional information for people who are below the filing threshold, adult children claimed as dependents, and for those of you who are eligible for the payments but did not have a refund direct deposited in 2018 or 2019.

If you haven’t turned in your tax documents to the office yet, you can mail them, you can upload them, or you can wait until the governor lifts the stay at home order to drop them off. We have until 7/15 to finish the returns at this point so I see no reason to open the office to clients at this time. Everyone should be doing their best to stay at home. I will, of course, re-evaluate if the order continues beyond May 15th. If you are one of my clients who routinely has a “late K1” that is still no problem! I know who you are, I’m watching the deadlines, and I will be in touch!

Same rules for finished returns as for incoming returns. For the most part Cat will be sending them to you “as if” you were one of our out of state clients. When you get your copy you can call (leave a message) or e-mail to schedule a full review appointment by phone or Zoom. In this case I do not recommend waiting until the stay at home order is lifted for a review & signature appointment. If too many of you do that it is going to create yet another bottleneck similar to the one that occurred when all those return packets came in during March.

Finally, a reminder. I do not use text to communicate with clients. I know that some of you would like it if I did, but it simply is not a workable option right now. If that’s a deal breaker for you, I understand but I have to run my business in the way that best meets the needs of all of my clients and my professional needs with respect to office efficiency and security. Not to mention in a way that respects the boundary between my professional and personal lives.

As always, I appreciate your patience and understanding during this difficult time. It has definitely pushed me to the breaking point and is causing me to re-evaluate how the practice will be run moving forward into next tax season.

#fullambo out

When, where, how, I don’t know yet, but remember yesterday’s post where I mentioned the “donut hole” for college-age dependents? Two Michigan senators have introduced legislation to address that and it will probably be part of a larger Phase 4 relief package according to Kay Bell at Don’t Mess with Taxes.