A flurry of unexpected announcements from the IRS regarding the latest pandemic relief package has sent advisors and accountants scrambling to suss out tax savings for their clients.
Even with the filing deadline extended to May 17, it hasn’t been easy.
“It’s a disaster. It’s a mess. It’s a nightmare,” says Neil Carousso, a CFP and CPA In Bayside, New York.
The latest complication to an already-chaotic season comes thanks to a new tax break for a chunk of unemployment benefits received last year. One day after extending the filing deadline, the IRS said on March 18 that it would “automatically” issue refunds of taxes that individuals who already filed had paid on $10,200 in benefits received last year. The surprise announcement came one week after after President Biden signed the $1.9 trillion pandemic relief bill, exempting the chunk of benefits from federal tax.
At a Congressional hearing on the filing season on March 18, IRS Commissioner Charles Rettig promised that the IRS would "automatically" compute the refund for taxpayers who have already sent in their returns. Advisors and accountants are sceptical.
“How the IRS is going to do this with returns already filed -- it’s going to be a challenge,” says Scott Rutherford, a wealth advisor who is also a CFP and CPA at Gratus Capital, an RIA in Atlanta.
Rettig has commanded taxpayers not to file amended returns. More than 66 million individuals had sent in their returns as of March 12, with more than 58 million already processed.
Some advisors plan to ignore his directive.
“It’s not incumbent on the IRS to make a taxpayer whole,” says Stephen Bonick, a CPF and CPA in Monterey, California. “You can let the IRS do the work for you, or you can do it yourself and file an amended [return] as a prophylactic.”
The latest IRS guidance, made as the tax season is in full swing, has poured fuel on a filing season that some advisors said was already a "dumpster fire.”