First Train Wreck of 2021 Individual Filing Season (and it’s a big one!)

 Tucked away on line 30 (page 2) of your 2020 return (due April 15, 2021) is the reconciliation of the advance payments you may have received last year. It’s going to generate a lot of headaches this year.

Remember the $1200 per adult and $500 per child payment you got last summer? Or didn’t receive? This has to be reconciled on line 30’s worksheet. This will be known as the Economic Impact Payment 1 (EIP1).

How about the $600 per person payment you received (or not) at the beginning of January 2021? EIP2 also has to be reconciled on line 30 by the time your return is filed (again, April 15, 2021 unless an extension is filed).

If it’s not reconciled, there are unpleasant things that can happen:

1. IRS can hold the processing of your return, and request the information from you, resulting in long delays before the return is processed and/or refund issued.
2. IRS can process the return as filed, and send you a letter later (sometimes two years later) indicating there’s a problem with the return.
3. Regardless of 1 or 2, you’ll be upset with your CPA. No one likes letters from the IRS, delays in refunds, or not being able to show your lender that your return was processed when you’re trying to refinance or purchase.

So:

1. Even if the information is not requested from your CPA, provide information about the amounts received and identify them as EIP1 and/or EIP2.
2. I will be pulling IRS transcripts to see what the IRS thinks they have issued to you. I have Power of Attorney for many of my clients already, and will be requesting them for the remainder. Generally I cover the open statute years (2017 for most) until a date in the future (generally I have them run until 2025 to cut down on paperwork). POAs allow the IRS to talk to me and provide information about your return – I do not request authorization to sign returns or obtain refunds for you.
3. Expect delays. I prefer to file returns one time (correctly). Amended returns are processed manually and the IRS is months behind already. A new POA requires me calling the IRS , then waiting on hold, then 10-30 minutes of processing time for the IRS to send transcripts. If I already have POA on file for you, I can retrieve the transcripts within 10 minutes, but the IRS unit that grants online access is also running behind – as of today (February 1) they have not processed a request I sent on January 7.