Friday, April 19, 2013
THAT WAS THE TAX SEASON THAT WAS 2013
I survived another tax season. 42 down – 8 to go!
This was the first tax season in my new home in a new state. A little different than past years. And now that it is over I will do some things a bit differently next year. I lost only a handful of clients – and those who did not send me their “stuff” this year were all elderly, so the reason I did not get their “stuff” could have nothing to do with my move.
It was a “traditional” season – ending on April 15th (or for me April 14th). No extra days.
The season got off to a late start for many tax preparers. 2012 ended with much uncertainty regarding 2012 and 2013 federal returns and many unresolved issues involving both years. While the idiots in Washington had procrastinated in past years, this time they really outdid themselves and truly waited until very literally the last minute to pass needed tax legislation. The American Taxpayer Relief Act of 2012 passed the Senate in the early hours of the morning and the House in the evening of January 1, 2013.
Because of the more than usual irresponsibility of Congress the IRS announced that it would not be able to begin processing either paper or electronically filed 2012 tax returns until January 30th.
When making this announcement the Service also said –
“There are several forms affected by the late legislation that require more extensive programming and testing of IRS systems. The IRS hopes to begin accepting tax returns including these tax forms between late February and into March; a specific date will be announced in the near future.”
Among the forms that would require “more extensive programming and testing” were -
• Form 4562, Depreciation and Amortization
• Form 5695, Residential Energy Credits
• Form 8396, Mortgage Interest Credit
• Form 8582, Passive Activity Loss Limitations
• Form 8839, Qualified Adoption Expenses
• Form 8863, Education Credits
• Form 8903, Domestic Production Activities Deduction
Did this late start affect my practice? Not in the least. For me the tax season has never “officially” begun until February 1st. This is because issuers of information return have traditionally had until January 31st to get all W-2s, 1099s, and 1098s to taxpayers (some 1099 filers now have until February 15th). Back when I, and my mentor before me, had the storefront office we did not open the doors to the public until February 1st. I expect I would be able to count on the fingers of one hand the number of returns I have prepared before February 1 over the years.
And most of you know that in the past 41 tax seasons I have never used flawed and expensive tax preparation software to prepare the federal tax returns of my clients, and I certainly did not begin to do so this tax season, so I was, and am, unable to submit federal returns electronically. I have renewed my vow to never use flawed and expensive tax preparation software to prepare 1040s for my remaining 8 seasons.
So I experienced no delays in starting the tax season on time. And I experienced no delays in preparing returns containing the above listed IRS forms. Client refunds for returns with these forms may have been delayed, but nothing stopped me from preparing the returns and getting them back to the client.
There were additional delays during the season for some returns claiming an education credit on Form 8863. Tax refunds for about 600,000 taxpayers who used fast-food tax preparation chains, like Henry and Richard, to prepare their returns were delayed due to a “software glitch”. Just one more reason not to use fast-food chains to prepare your returns.
There was nothing really new for 2012 returns.
It was the second year that brokerage houses and mutual fund companies had to report cost basis information for certain investment sales on Form 1099-B, and preparers and taxpayers had to enter investment sale transactions on as many as three separate Form 8949s, carrying over the totals to Schedule D. While there was inconsistent treatment of 2011 Form 1099-B reporting among the various houses, resulting in extra work, things were better, and reporting was more consistent and easier to follow, on 2012 statements. Only Morgan Stanley’s reporting was somewhat lacking.
And this season I was acclimated to the new Schedule E format for reporting rental income and expenses.
The only new wrinkle was the added “due diligence” requirements for tax pros who prepared returns claiming the Earned Income Credit. I had announced that I would not prepare any 2012 returns that included a claim for the EIC - but I ended up breaking this promise. All but one of the very, very few 2012 returns with EIC that I did prepare involved clients (all long-time) without children. The one that did involve a dependent child was a single mother whose returns I have been preparing since before her children were born. How could I tell her I would not be doing her return this year? There was one child involved, who was in college, so my “due diligence” consisted of looking at the Form 1098-T.
While I no longer accept any new clients, if I were doing so I would certainly not have taken on any new client who could be eligible for the Earned Income Credit.
I did not experience any “technical difficulties” during the 2013 filing season. My computer and printer worked perfectly throughout, and I had no issues of any consequence with my car or the weather.
As for state returns, a FU that in past years did not allow NJ-1040s reporting gross income of over $150,000 to be submitted via NJWebFile (the NJDOT had been too lazy or too cheap to correct the software) was finally fixed and I was able to submit many more state returns online this season, allowing these clients to get direct deposit of their NJ refunds.
And, while New York added a new form for claiming itemized deductions, it did do away with the IT-2 and once again allowed me to simply attach Copy 2 of the W-2 to the IT-201 or IT-203, saving what had been an unnecessary waste of valuable time.
I ended last year’s tax filing season with 29 GDEs – a record. This year it was closer to 40. With very few exceptions, all the returns extended were either received after March 15th (in my January letter to clients this year I said I could not guarantee that returns received after March 15th would be done in time for an April 15th filing), had missing information that would not be available until after April 15th, or were not received at all and the client asked me via email to submit a Form 4868.
The increased number had nothing to do with IRS processing delays, or even with the lack of extra days, but were, I believe, the result of choices I made because of my move. As I said earlier, I will do things a little differently next year.
For many preparers the delays that began the tax filing season also ended the season (again, none that affected me).
PA tax lawyer and fellow tax blogger Kelly Phillips Erb reported “Pennsylvania Taxpayers Get An Extra Day To File Returns” -
“After a delay of what Revenue Secretary Dan Meuser referred to as “a few hours” of errors accessing taxpayer service web sites, the Commonwealth finally decided to give taxpayers a break. The Commonwealth is offering taxpayers one extra day to file their personal income tax returns. Those taxpayers who timely file their 2012 personal income tax returns by tomorrow, Tuesday, April 16, 2013, will not be assessed penalties and interest.”
California taxpayers also got an extra day. In “When a Day Late Isn’t a Dollar Short” Russ Fox explained -
“The Franchise Tax Board had major computer issues with their website on Monday. The FTB announced that anyone who pays their tax on April 16th via the FTB’s webpay system (for individuals or for businesses) on April 16th will be considered to have made the payments on April 15th.”
And the IRS recognized that the delay in processing certain returns caused problems for preparers -
“The IRS has provided late-payment penalty relief to individuals and businesses who request tax-filing extensions and attach to their returns any of the ‘delayed’ forms that couldn’t be filed until February or March. Taxpayers using forms claiming depreciation deductions and various business credits qualify for this relief.
Other delayed forms include those for Residential Energy Credits (and related ‘Energy Efficiency’ Credits), Education Credits, Mortgage Interest Credits, and others. Click here for the text of an IRS Notice that includes a complete list of eligible forms."
So there you have it – the tax season that was.
FYI - fellow tax bloggers Jason Dinesen and Trish McIntire have also posted about their 2013 tax seasons (click on the name to read their post).