With the COVID-19 pandemic passing the half-year mark, individuals and businesses have learned to cope with a host of issues. Whether they’re dealing directly with clients, or with the Internal Revenue Service on behalf of clients, it is a different world than the one they envisioned at the start of the 2020 filing season.
From the practitioners’ standpoint, it has been “the never-ending tax season,” remarked Ryan Losi, executive vice president of accounting firm Piascik.
“It’s been nine and a half months of non-stop tax work,” he explained. “It will lead to a pretty decent year when there was a lot of uncertainty at the beginning. But our staff has put in a ton of hours this year, without being able to take any meaningful paid time off. We have to make an exception to our policy of only being able to carry over a limited amount of PTO. The policy is there because it forces people to take a break, but when everything is closed, they can’t enjoy recreational activities.”
The pandemic has affected Losi’s business practices as well. “Normally, I travel extensively to meet with business clients in person,” he said. “But due to the pandemic, I haven’t been on a plane since March. We’ve had virtual meetings through Zoom, Webex, Skype and Microsoft, but it’s not the same as sitting down with the client. For the short term, virtual conferences have been great, but clients want to physically meet with you.”
When the IRS “reopened,” it was a slow process with parts of the agency still at less than full capacity, Losi observed.
“Mail to specialty groups that handled large claims or that were supposed to collect and apply paper checks that were mailed in April just sat there and built up over months. It created stress for our clients and extra work for us that can’t be billed. For example, some of our clients have refund claims from 2019 that we’re still waiting on the IRS to issue,” he explained. “We had clients that made payment in April and the IRS hasn’t opened the mail with their checks and deposited them into the Treasury, or updated their records to show the payment was made. Meanwhile, the IRS has been sending out notices of deficiency, while clients call us to say they expected a refund. The people that process a power of attorney haven’t opened up yet, so we can’t talk about the account with the service.”
One of the biggest causes of pandemic-related stress, Losi believes, will be the inaction of Congress on the taxability of business expenses paid with forgiven Paycheck Protection Program funds. The IRS has maintained that such expenses are not deductible, while many observers and individual members of Congress have said that this position is incorrect.
“Because of the extension of the permitted spending period from eight weeks to 24 weeks, coupled with the 90 days the Small Business Administration has to review the banks’ submission on forgiveness, there will be taxpayers that don’t know whether they should pick up that income in 2020, 2021, or whether it is entirely tax-exempt,” Losi explained. “These are business owners trying to deal with COVID, and they will get hit with interest and penalties if they don’t pay the right amount of estimated tax for the fourth quarter.”
“I’m hoping that the IRS will grant some relief for this issue,” he continued. “If Congress doesn’t clear things up, taxpayers will be expected to pay tax on an amount they don’t know. My position with our clients is that they won’t be taxable until the bank issues a relief letter. If that doesn’t happen until after Dec. 31, 2020, we’re not dealing with a taxable event in 2020.”
Trouble at the mothership
A primary issue for tax practitioners is dealing with a hobbled IRS, which itself is beset with pandemic-related issues.
“People think of the IRS as one big conglomerate, but it’s scattered all over the place,” remarked Roger Harris, president of Padgett Business Services. “When they send people home, they have to follow the rules of the state they’re in. For example, California is further behind in opening up than Georgia.”
Practitioners should have patience, Harris suggested. “There’s a certain catch-up time that the IRS has to work through,” he said. “In some cases, there’s been no one to open the mail for a half a year. While they were closed, the mail kept coming in. When they reopen, they have to go through the accumulated mail before they deal with the mail that’s coming in currently.”
“If you mailed something to the IRS and haven’t heard back, the last thing you want to do is mail them something else,” he said. “Just wait for them to get back to you. Anything new will just get put into an already backed-up amount of mail. And it’s another reason to say that if your choice is between mailing and e-filing, always e-file. If a refund-due return was due on October 15 and it was mailed on paper, it will take a lot longer to get the refund. Every advantage that e-file had is magnified now.”
The slowdown affected the sending out of notices, Harris indicated. “They briefly stopped sending notices,” he said. “But now that offices are coming back, notices will start going out again. Likewise, audits were halted due to coronavirus concerns, but they’re now restarting them in virtual form.”
Practitioners that needed a power of attorney were out of luck, according to Bill Nemeth, an Atlanta-based tax practitioner and president of the Georgia Association of Enrolled Agents.
“Guys like me occasionally encounter a new client and want to have a power of attorney so we can pull the taxpayer’s transcript,” he said. “The processing time for a POA has stretched to over three months. But if we have a Form 8821, ‘Tax Information Authorization,’ we’re authorized to get data from the IRS, but not to interact or represent them.”
Nemeth routinely files Form 8821 for most clients. “When a third-party private collection agency sees that I have this authorization on file, they typically call me and ask when the taxpayer is going to pay. I tell them that I only have Form 8821 and that I’m precluded from discussing the case because I don’t have representation authority or rights.”
Practitioners experienced extraordinary hold times on calls to the IRS due to the pandemic, Nemeth observed. “They were out from late March until August, then they started to come back with social distancing and a partial staff,” he said. “There was an exceptionally long wait time on calls.”
To reduce the hold time, Nemeth found it worthwhile to subscribe to enQ, a service which sells spots in the IRS phone queue. “Not many people know about it,” he said. “I spend $500 a year to get preferred service. I can get through to someone within three minutes. It’s like a Disney FastPass — I don’t have to wait in line with all the other commoners.”
When the agency was down, certified mail was returned to the sender because there was no one to sign for it, Nemeth noted. “If you sent an amended return for 2018 and sent it by certified mail, you may or may not get back the little green card,” he said.
Nemeth’s solution is to send it by priority mail with tracking, and with a check made out to the IRS taped to the front of the return.
“If I mailed it October 6, I make the check out for $10.06. I can see the payment on their transcript within one week, so I know they received it — it’s normally cashed almost immediately. If they cashed the check and it was taped to the front of the return, that’s pretty good proof that they got the return.”
