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IRS prepares for flood of last-minute returns

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The Internal Revenue Service is getting ready for an onslaught of tax returns arriving by Tax Day on Monday, though many taxpayers will be eligible for automatic extensions due to natural disasters across the country.

The tax deadline is April 15 for most taxpayers, but taxpayers in Maine and Massachusetts will have until April 17 because these states observe the Patriots’ Day holiday on April 15 this year and April 16 is the Emancipation Day holiday in the District of Columbia. Other taxpayers in disaster areas, certain active-duty military members and citizens living abroad automatically get more time to file.

The IRS estimates that 19 million taxpayers will file for an automatic extension this year. It’s already received over 100 million tax returns, and tens of millions more are expected to be filed as Tax Day approaches.

“Delivering tax season is a massive undertaking, and we greatly appreciate people in many different areas working long hours to serve taxpayers as the tax deadline approaches,” said IRS Commissioner Danny Werfel in a statement Friday. “This effort reaches far beyond the IRS and includes hard-working tax professionals, software providers, the payroll community as well as our colleagues in the state tax agencies. Their work helping taxpayers makes a difference.” 

He noted that millions of taxpayers across the nation will be working on their tax returns during the final hours. There are various free tools on IRS.gov to help answer basic tax law questions, provide free filing options, update refund status and even provide ways to request an extension for more time to file. The IRS has also expanded its special assistance for taxpayers through the final weekend of tax season with special Saturday hours at 70 Taxpayer Assistance Centers.

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The Internal Revenue Service building in Washington, D.C.

Samuel Corum/Bloomberg

This year’s tax season has gone relatively smoothly, thanks to the lack of major changes in the tax laws. The tax extenders legislation that passed in the House in January has so far remained stalled in the Senate amid growing opposition by Republicans on the Senate Finance Committee. It could have meant some mid-tax season adjustments by IRS programmers in how much could be claimed on the Child Tax Credit and revived a number of expired business tax breaks, with a flood of amended returns sure to follow. But without those changes, and many of the pandemic tax breaks lapsed, tax professionals are getting to experience a more normal tax season. The IRS is still able to draw on the expanded funding it received from the Inflation Reduction Act of 2022 to improve its technology and customer service, although the $80 billion appropriated over a decade has since been reduced by around $20 billion.

Of the $60 billion in long-term modernization funds provided by the Inflation Reduction Act, the IRS through 2023 had spent about $4.4 billion of it, mostly on taxpayer services and operations support. “IRS employees have proven, once again, that the decision by Congress and the administration to invest in and rebuild the agency was a wise one,” said National Treasury Employees Union national president Doreen Greenwald in a statement Friday. “As more than 100 million taxpayers have witnessed so far this season, the IRS is better equipped to answer their questions, guide them toward filing accurate returns and deliver their refunds quickly.”

Tax professionals have noticed the difference. “I would say that overall, I feel like things are better, ” said Eric Bronnenkant, director of tax at the investment advisor Betterment. “Obviously, you compare them to during the pandemic, when they passed, when they had all these stimulus payments, and all sorts of special provisions due to the pandemic, that definitely made things a lot more complicated. While I know that there are many people who miss some of those special pandemic provisions, the fact that we’ve gotten back to a more stable normalized level has arguably made the overall tax-filing season smoother, but not perfect.”

The deadline for claiming one of those pandemic tax breaks is about to expire on May 17: the Recovery Rebate Credit. “The May 17, 2024 deadline is fast approaching for taxpayers who have not yet filed a 2020 tax return to claim a refund of withholdings, estimated taxes or their 2020 Recovery Rebate Credit,” wrote National Taxpayer Advocate Erin Collins in a blog post Thursday. “The IRS estimates that almost 940,000 of the nation’s taxpayers have unclaimed refunds totaling more than $1 billion for tax year 2020 and encourages eligible non-filers in 2020 to claim their Recovery Rebate Credit before the May 17 deadline.”

Taxpayers may still face some hurdles this tax season, especially if they worked in multiple states last year. “That’s an extra challenge, particularly for road warriors who could be filing in five or more states, depending on how many places that you’ve worked and what those specific state rules are,” said Bronnenkant. 

He noted that he often gets questions from clients about filing for tax extensions as the deadline approaches. “An extension to file is not an extension to pay,” said Bronnenkant. “You’re still expected to pay what you think that you owe when you file right now, or when you file for an extension. That doesn’t give you any more extra time to pay. It just gives you extra time to gather all your information. You still want to make the best guess of what you think that you’re going to owe and pay that now.”

Similarly with individual retirement account contributions, taxpayers who want to set aside money for retirement, can make up to $6,500 in IRA contributions if they’re under the age of 50, or $7,500 if they’re over age 50, up until April 15. “Even if you’re on an extension, that doesn’t give you any extra time to contribute to your traditional or Roth IRA,” said Bronnenkant. “Maximizing those tax-advantaged accounts is definitely on the top of people’s minds for sure.”

There are some exceptions for Self-Employed Pension plans and the SEP IRAs associated with them. “For some self-employed people, they may also have a SEP,” said Bronnenkant. “For the SEP, if you’re on extension, you can actually contribute until October 15, so that gives you extra time. The rules for that are a little bit different than the traditional and Roth.”

Some taxpayers are bypassing their tax preparers and trying out the IRS’s new Direct File free tax software that’s being pilot tested in 12 states this tax season for those with simpler tax returns. The IRS launched the program last month and it’s seeing steadily increasing usage, recently, adding a new feature in recent days to automatically import a taxpayer’s adjusted gross income information from last year’s tax return.

The IRS hopes to expand the pilot program next year more widely with additional features, assuming the program isn’t shut down by Congress or the next administration after the November elections. 

“We are actually doing some more user research right now with Spanish-speaking filers,” said Ayushi Roy, deputy director of New America’s New Practice Lab, which helped carry out a feasibility study for developing the Direct File system. “We don’t have a clear sense which tax scenarios ought to be prioritized if this is continued. We might find that it’s something like student loans is actually maybe a scenario to cover, or joint filing or shared custody. We don;t have that information yet. There’s sort of a top 10, but whittling it down is still a work in progress.”

Even if the Direct File program continues, she doesn’t see that as a threat to professional tax preparers. “Last year, of the 162 million returns that were filed, 150 million were electronically filed, and more than half of that, 85 million specifically, were filed by tax professionals,” said Roy. “That’s a higher ratio of preparation by professionals than self-preparation by software than previous years. That trend is actually really interesting and I am interested in seeing how that figure ultimately lands this year. It is worth noting, though, it will be hard to evaluate by April 15 because we have so many natural disaster-related extended filers, particularly in California and some other states that dealt with fires and flooding in the past filing year, so I don’t know how much we’ll be able to tell from the data after the 15th versus data in the fall.”

There will still be a place for commercial tax software as well, and some of the vendors in the Free File program and beyond seem to be lowering their eligibility requirements. “The Direct File program is not in the business of taking over the process of tax preparation,” said Roy. “The tax preparation landscape is rightfully varied, with lots of options for different people that work for different situations. That’s the right way for the landscape to exist. The purpose of the Direct File program was an effort to fill a gap in an existing market, and if that gap can be filled through other means, including lifting income eligibility restrictions in TurboTax and H&R Block, that to me feels like a win.”

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House passes tax administration bills

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The House unanimously passed four bipartisan bills Tuesday concerning taxes and the Internal Revenue Service that were all endorsed this week by the American Institute of CPAs, and passed two others as well.

  • H.R. 1152, the Electronic Filing and Payment Fairness Act, sponsored by Rep. Darin LaHood, R-Illinois, Suzan Delbene, D-Washington, Randy Feenstra, R-Iowa, Brad Schneider, D-Illinois, Brian Fitzpatrick, R-Pennsylvania and Jimmy Panetta, D-California. The bill would apply the “mailbox rule” to electronically submitted tax returns and payments to allow the IRS to record payments and documents submitted to the IRS electronically on the day the payments or documents are submitted instead of when they are received or reviewed at a later date. The AICPA believes this would offer clarity and simplification to the payment and document submission process while protecting taxpayers from undue penalties.
  • H.R. 998, the Internal Revenue Service Math and Taxpayer Help Act, sponsored by Rep. Randy Feenstra, R-Iowa, and Brad Schneider, D-Illinois, which would require notices describing a mathematical or clerical error to be made in plain language, and require the Treasury to provide additional procedures for requesting an abatement of a math or clerical error adjustment, including by telephone or in person, among other provisions.
  • H.R. 517, the Filing Relief for Natural Disasters Act, sponsored by Rep. David Kustoff, R-Tennessee, and Judy Chu, D-California. The process of receiving tax relief from the IRS following a natural disaster typically must follow a federal disaster declaration, which can often come weeks after a state disaster declaration. The bill would provide the IRS with authority to grant tax relief once the governor of a state declares either a disaster or a state of emergency and expand the mandatory federal filing extension under Section 7508(d) of the Tax Code from 60 days to 120 days, providing taxpayers with more time to file tax returns after a disaster.
  • H.R. 1491, the Disaster related Extension of Deadlines Act, sponsored by Rep. Gregory Murphy, R-North Carolina, and Jimmy Panetta, D-California, would extend the amount of time disaster victims would have to file for a tax refund or credit (i.e., the lookback period) by the amount of time afforded pursuant to a disaster relief postponement period for taxpayers affected by major disasters. This legislative solution would place taxpayers on equal footing as taxpayers not impacted by major disasters and would afford greater clarity and certainty to taxpayers and tax practitioners regarding this lookback period.

“The AICPA has long supported these proposals and will continue to work to advance comprehensive legislation that enhances IRS operations and improves the taxpayer experience,” said Melanie Lauridsen, vice president of tax policy and advocacy for the AICPA, in a statement Tuesday. “We are pleased to work closely with each of these Representatives on common-sense reforms that will benefit taxpayers, tax practitioners and tax administration and we’re encouraged by their passage in the House. We look forward to continuing to work with Congress to improve the taxpayer experience.”

The bills were also included in a recent Senate discussion draft aimed at improving tax administration at the IRS that are strongly supported by the AICPA.

The House also passed two other tax-related bills Tuesday that weren’t endorsed in the recent AICPA letter. 

  • H.R. 1155, Recovery of Stolen Checks Act, sponsored by Rep. Nicole Malliotakis, R-New York, would require the IRS to create a process for taxpayers to request a replacement via direct deposit for a stolen paper check. If a check is determined to be stolen or lost, and not cashed, a taxpayer will receive a replacement check once the original check is cancelled, but many taxpayers are having their replacement checks stolen as well. Taxpayers who have a check stolen are then unable to request that the replacement check be sent via direct deposit. The bill would require the Treasury to establish processes and procedures under which taxpayers, who are otherwise eligible to receive an amount by paper check in replacement of a lost or stolen paper check, may elect to receive such amount by direct deposit.
  • H.R. 997, National Taxpayer Advocate Enhancement Act, sponsored by Rep. Randy Feenstra, R-Iowa, would prevent IRS interference with National Taxpayer Advocate personnel by granting the NTA responsibility for its attorneys. In advocating for taxpayer rights, the National Taxpayer Advocate often requires independent legal advice. But currently, the staff members hired by the National Taxpayer Advocate are accountable to internal IRS counsel, not the Taxpayer Advocate, creating a potential conflict of interest to the detriment of taxpayers. The bill would authorize the National Taxpayer Advocate to hire attorneys who report directly to her, helping establish independence from the IRS. 

House  Ways and Means Committee Chairman Jason Smith, R-Missouri, applauded the bipartisan House passage of the various bills, which had been unanimously passed by the committee.

“President Trump was elected on the promise of finally making the government work better for working people,” Smith said in a statement Tuesday. “This bipartisan legislation helps fulfill that mandate and makes improvements to tax administration that will make it easier for the American people to file their taxes. Those who are rebuilding after a natural disaster particularly need help filing taxes, which is why this set of bills lightens the load for taxpayers in communities struck by a hurricane, tornado or some other disaster. With Tax Day just a few days away, we must look for common-sense, bipartisan ways to make filing taxes less of a hassle.”

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In the blogs: Many hats

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Teaching fraud; easement settlement offers; new blog on the block; and other highlights from our favorite tax bloggers.

Many hats

  • Taxbuzz (https://www.taxbuzz.com/blog): There’s sure an “I” in this “teamwork:” What to know about potential IRS and ICE collaboration.
  • Tax Vox (https://www.taxpolicycenter.org/taxvox): How IRS data would likely be unhelpful validating SNAP eligibility.
  • Yeo & Yeo (https://www.yeoandyeo.com/resources): How financial benchmarking (including involving taxes) can help business clients see trends, pinpoint areas for improvement and forecast future performance.
  • Integritas3 (https://www.integritas3.com/blog): One way to take a bite out of crime, according to this instructor blogger: Teach grad students how to detect, investigate and prevent financial fraud.
  • HBK (https://hbkcpa.com/insights/): Verifying income, fairly distributing property, digging the soon-to-be-ex’s assets out of the back of the dark, dark closet: How forensic accounting has emerged as a crucial element in divorces.

Standing out

Genuine intelligence

  • AICPA & CIMA Insights (https://www.aicpa-cima.com/blog): How artificial intelligence and other tech is “Reshaping Finance,” according to this podcast. Didem Un Ates, CEO of a U.K.-based company offering AI advisory services, tackles the topic.
  • Taxjar (https:/www.taxjar.com/resources/blog): How AI and automation can help even the knottiest sales tax obligations and problems.
  • Dean Dorton (https://deandorton.com/insights/): Favorite opening of the week: “The madness doesn’t just happen on college basketball courts — it also happens when your finance team is stuck using a legacy on-premises accounting system.”
  • Canopy (https://www.getcanopy.com/blog): Top client portals for accounting firms in 2025.
  • Mauled Again (https://mauledagain.blogspot.com/): Despite what Facebook claims, dependents have to be human.

New to us

  • Berkowitz Pollack Brant (https://www.bpbcpa.com/articles-press-releases/): This Florida firm offers a variety of services to many industries and has a good, wide-ranging blog. Recent topics include the BE-10, nexus and state and local tax obligations, IRS cuts and what to know about the possible bonus depreciation phase out. Welcome!

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Is gen AI really a SOX gamechanger?

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By streamlining tasks such as risk assessment, control testing, and reporting, gen AI has the potential to increase efficiency across the entire SOX lifecycle.

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