Economic Impact Payments

[peggysioux]

How are other tax preparers handling taxpayers who state they did not receive their economic impact payments in 2020 and early part of 2021? Are you inputting zero economic impact payments received; therefore creating a credit on tax return? Or are you asking taxpayers to set up account with IRS to confirm they did not receive their payments before inputting info on tax return? I have a client that adamantly states he did not receive the first stimulus payment, but received the second stimulus payment in full. Payments would have not been directly deposited because taxpayer has never provided banking info to taxing agencies. I would think that if taxpayer received second payment in full, he would have also received first payment, but he is telling us that he did not receive. He also is not too big on using computers so he does not want to set up an account. Just checking to see how others are handling. It amazes me how many people don’t remember receiving or how much they received……that means their economic situation was not dire…..when you are in a situation where every penny counts; you know how many pennies you received!

Peggy Sioux

[BOB W]

Sounds like this T/P would of rec'd a debit card for the first payment and probably threw it away. I believe IRS will be monitoring these types of problems when the 2020 return is filed. T/P should be warned that your results may differ when IRS reviews for stimulus records.

I refuse to file unless the T/P searches their bank statements for payments. ( This is not your clients problem). But if a client strongly says no stimulus payment received, I file per their demand and give warning that the refund may be different than calculated..

[Twin Turbo Z]

Same as Bob W. I cant wait for all this stimulus stuff to be over. It is surprising the number of clients who can not be bothered to look at bank records and or dont remember getting anything. If someone gave me extra money, I sure the hell would remember !!! Cmon April 15th !!!! We need a break !!!

[BOB W]

Next year it will be worse,,, TTB CLIENT HANDOUT has a full right up if you purchased that service.

American Rescue Plan Act of 2021

[Dude]

Same as Bob W. I cant wait for all this stimulus stuff to be over. It is surprising the number of clients who can not be bothered to look at bank records and or dont remember getting anything. If someone gave me extra money, I sure the hell would remember !!! Cmon April 15th !!!! We need a break !!!

People who are used to getting $10,000 in EITC don't prioritize these piddly economic impact payments. The bigger question: have they started realizing that Robinhood (you know t he one they funded with the stimulus checks) account probably has disqualified them from EITC altogether?

Of course we can probably assume congress will waive the investment income requirement as being over burdensome......or will they?

[taxmandan]

With a bit of 'encouragement' from us, most of our clients who are unsure have looked up their bank statements to get the amount deposited and have been able to give us correct amounts. If any doubt, to avoid Preparer penalties for inaccurate tax return, we include Form 8275 Disclosure statement that the stimulus amounts were determined by all available information at the time of preparation. Also, we have a form that the client signs stating what they think they received or didn't. OPR has indicated that Preparer penalties could be assessed if you get the amount wrong and the IRS has to adjust the return.

[Rapid Robert]

OPR has indicated that Preparer penalties could be assessed if you get the [RRC] amount wrong and the IRS has to adjust the return.

Is there any backup or support for this claim? I don't believe OPR can impose any monetary penalties (they certainly cannot revoke a PTIN), only bar preparers temporarily or permanently from representing taxpayers before the IRS (courts have determined that preparing a return is not representing a taxpayer before the IRS).

Circ. 230 states that preparers may have a good faith reliance on information provided by the taxpayer as long as it does not appear inconsistent or incomplete.

What preparer penalty in particular are you referring to? Section 6694(a)? (Understatement of tax caused by an unreasonable position taken on the tax return by the preparer.)

[Anarchrist]

Is there any backup or support for this claim?

No there isn't.
The irs is treating these mistakes as a math error.

[taxmandan]

Accounting Today, March 2, 2021: The Risks of Tax Season

"“Since Circular 230 practitioners — CPAs, Enrolled Agents and lawyers — are supposed to file complete and accurate returns, some preparers may ‘guess,’ which opens them up to penalties. If a Circular 230 practitioner were to guess, they should cover themselves by filing a Form 8275, “Disclosure Statement,” advising the IRS that the EIP amount was reconstructed using the best information available. This will eliminate any penalties to the preparer.”

Beanna Whitlock, executive director of the National Center for Professional Education Fellowship and former IRS director of National Public Liaison, suggests that preparers have their clients complete the following statement to support amounts reported as EIPs:

“Federal stimulus payments do not increase income for 2020. If you are eligible to receive a first- or second-round stimulus check, but you did not get it or it was not for the full amount, you may qualify for the ‘recovery rebate’ credit on your 2020 tax return for the stimulus money you should have received.

“You can claim the recovery rebate credit on Line 30 of your 2020 Form 1040 or Form 1040-SR.

“We will prepare a worksheet to calculate the amount of your credit, if any.

“In order to properly complete this reconciliation, you must provide the amount of EIP you received in the first payment mid-2020 and what you received with the second amount received in late 2020 or early 2021.

“These amounts will be used to prepare your return. Should the IRS not agree with the amounts reported there will be an adjustment to your refund due you.

“I (We) acknowledge receipt of the following amounts of EIP payments, to the best of our knowledge, and authorize the amounts to be reported on our 2020 Form 1040.”

The form should include lines for the “First Amount” and the “Second Amount” and signature lines for the taxpayer and their spouse."

I'll heed the advice of Breanna Whitlock every day of the week. You do what you want and hope the IRS is treating these as 'math errors.'

[ATSMAN]

I am just frustrated they keep on calling our office to check on stimulus payment thinking we have "insideer" knowledge when they may get it. We constantly have to send them back to Get My Payments

[Lion]

I just did a cut & paste of Beanna's statement with lines for amounts and signatures, saved it to send electronically, printed a few, and am uploading it to my portal available to all clients. Thank you, TaxManDan, for sharing.

[ATSMAN]

I just did a cut & paste of Beanna's statement with lines for amounts and signatures, saved it to send electronically, printed a few, and am uploading it to my portal available to all clients. Thank you, TaxManDan, for sharing.

Just curious if the client refuses to sign that statement will you refuse to prepare their return? I do tell them on the phone or e-mail that I need what they got for EIP1 and EIP2 and go with the figure they provide if they missed that question in the Tax Season Questionnaire. I think in one or two situations I entered the max they would have received using 2019 figures and the online calculator because they told me they remember receiving a check or debit card but kept no records and those notices are long gone!

[Lion]

Case by case. My clients have been with me for years, so I don't expect much push-back. If someone balks now, I'll tell them I'll put them on extension while they look for their amounts. If they balk later, I'll tell them I'll wait for it. Until now, I've been asking them via email, and saving their emailed response. A lot wrote the amounts in the tax info they gave me, and a few had 1444 &/or 1444-B, so that was great. Many thought the January deposit didn't count until next year, so I like the way this letter explains it.

[ATSMAN]

Case by case. My clients have been with me for years, so I don't expect much push-back. If someone balks now, I'll tell them I'll put them on extension while they look for their amounts. If they balk later, I'll tell them I'll wait for it. Until now, I've been asking them via email, and saving their emailed response. A lot wrote the amounts in the tax info they gave me, and a few had 1444 &/or 1444-B, so that was great. Many thought the January deposit didn't count until next year, so I like the way this letter explains it.

Here is one that just happened about an hour back. Client walks into my office with Notice CP12 that they reduced his refund by $1200 and to make it worse the notice says We believe there was a miscalculation on your 2020 Form 1040 we adjusted your refund....

This is a blue collar guy and he thinks I screwed up. I show him my notes and he clearly stated that they never received EIP2. All they got was EIP1. So tomorrow he is going to take that notice and go to his bank and find out if there was a direct deposit or his wife cashed the check there. What a mess!

So I see the benefit if I had made him sign that he never got EIP2 !

[Rapid Robert]

I'll heed the advice of Breanna Whitlock every day of the week. You do what you want and hope the IRS is treating these as 'math errors.'

OK, so now we know the source. Breanna [sic] Whitlock does not speak for OPR, so your original claim about OPR possibly assessing penalties was bogus. I've attended a live CE presentation by Whitlock in the past, I know she has a good reputation but I wasn't that impressed and have passed by all subsequent opportunities I've had to pay for CE presented by her.

In fact, it is not even clear that the first paragraph you quoted is even attributable to Ms. Whitlock, (quoted immediately following) since her name is only associated with the subsequent text.

"Since Circular 230 practitioners — CPAs, Enrolled Agents and lawyers — are supposed to file complete and accurate returns, some preparers may ‘guess,’ which opens them up to penalties. If a Circular 230 practitioner were to guess, they should cover themselves by filing a Form 8275, “Disclosure Statement,” advising the IRS that the EIP amount was reconstructed using the best information available. This will eliminate any penalties to the preparer.”"

I have frequently advocated for using Form 8275 in the past, when appropriate, and that is not the case here. One is not "taking a position" subject to substantial authority by reporting the amount of RRC remaining after the taxpayer's self-reported EIP receipts. The code section I cited involves an "unreasonable position" taken on the tax return, and I don't see that applying at all. As for the taxpayer, the accuracy-related penalty (Sec 6662) only applies as follows, per TheTaxBook:
.
.

20% of underpayment due to:

• Negligence—includes failure to make a reasonable attempt to comply or intentional disregard.
• Substantial understatement of tax—more than the greater of 10% (5% for taxpayers claiming IRC section 199A deduction) of the actual amount due or $5,000.
• Substantial valuation misstatement.

.
Clearly, even if none of the EIPs were factored into the tax return, the understatement of tax would not exceed $5,000 even for MFJ (unless there were also a lot of children -- so maybe that is one exception). Further, the claim that "This [filing 8275] will eliminate any penalties to the preparer.”" is incorrect.

What is a shame is that instead of focusing on the template text to get taxpayers to accept some responsibility for the information they provide, which I have no problem with, you choose to focus instead on needless fearmongering and false information. Shame on Accounting Today for publishing it (if they did, I haven't independently verified it).