Ready or not, tax season has arrived… and the Internal Revenue Service says it’s not ready. The IRS will begin processing federal personal income tax returns in January 2021. 24. However, while the filing deadline has not changed, the IRS is still reporting being backlogged, underfunded, and under-staffed. The COVID-19 pandemic began to highlight some of the problems that existed within the IRS. Since federal employees were sent home in March 2020, the IRS has had limited ability for employees to work remotely and have no plans to sort and process mail via mail, although the IRS reports 61,000 remotely. were working. Now, in 2022, the IRS has issued a statement that it is preparing to accept the filing but be prepared for delays.
Long wait for estate refund
In 2021, the IRS had about 82,000 employees, tasked with processing more than 169 million personal returns and 53 million business returns in 2020. While slightly up from 2019, employee levels are still below where they were in 2010. There has been delay in processing of returns and notices due to adequate staffing. This delay seems to be most notable for those working on the administration of the estates of the deceased. After the taxpayer’s death, their final personal income tax return must still be filed. Any taxes must be paid prior to closing an asset, but at the same time, any refund must be received and processed before a property can be closed. Unfortunately, Form 1310 is required to claim a refund on behalf of a deceased taxpayer, and Form 1310 cannot be filed electronically. Thus, there are a large number of estates awaiting refunds that are extremely delayed due to limited staff at the IRS and the backlog of mail caused by the pandemic. In addition, many administrators find that a decedent did not file income tax appropriately before his death. The administrator of the property can file past due returns; However, those papers must also be filed, resulting in delays in processing. Even once processed, administrators await the final calculation of any interest and penalty payable; Thus, delays from the IRS are creating significant delays in closing estates across the country.
Electronic filing is better
The same delay is occurring for those responding to IRS notices by mail, which is not surprising given the delay in the mail. For customers as they prepare to file their 2021 personal income tax return, there are several tips for a smooth tax season. First, make sure your customer has all the information they need to complete their return. Given the delay in processing, you do not want your client to file an incomplete return and then later need to file an amended return on paper. Many investment account consolidated 1099s aren’t finalized until March, so if your client is likely to receive an amended 1099, it’s best to wait to file a return. Second, be prepared to file electronically. It appears that the delay the IRS is facing lies within the review and processing of returns filed on paper. While delays are still acknowledged, the IRS is reviewing and processing electronically filed returns much faster. Finally, advise your customers to be prepared to either pay your balance electronically or receive your refund electronically. Again, like filing, any payment processing appears to be delayed. In addition, a low employee level is making it very difficult to connect with someone over the telephone, thus making late payments will make it difficult, if not impossible, to straighten up. Lastly, be patient. For those forced to file on paper as an estate administrator, be patient. It may take a year or more for the return to be processed, but it will happen eventually.