American Rescue Plan: What Tax Pros Should Know
American Rescue Plan: What Tax Pros Should Know With the American Rescue Plan, signed by President Biden on March 11, 2021, comes a great deal of items for tax preparers…
May 18th, 2021
Tom reminds of us of the May 17 filing deadline, including what is and isn’t due today. He also shares what an extension gives our clients, as well as what it doesn’t give our clients. He then shares some guidance as to resubmitting rejected e-filed returns or extensions and still have them considered to be timely filed…
Congrats on making it to the end of a wild filing season!
by Tom O’Saben, EA
Hello again everybody, from the University of Illinois Tax School. This is Tom O’Saben, Enrolled Agent, the Assistant Director of Professional Education and Outreach for the Tax School. I’m a Fall Tax School instructor and author and reviewer of the University of Illinois Federal Tax Workbook, and heavily involved in the webinars that we present throughout the year. For those of you who might be new to our blogs, also come along with these video blogs that I try to do during tax season. We also do written blogs during certain times of the year or different times during the year. Also, I’m a tax practitioner with more than 31 years of experience and imagine what we would be talking about today. Yes indeed, ladies and gentlemen, today, May 17, is the filing deadline. Another new filing deadline from the old school of April 15th, since we’ve been in this pandemic world for now, more than a year.
So in particular, what I wanted to do today, given that it is May 17th and hopefully you’re listening to this as you’re getting going in your day, is to deal with some filing deadline tidbits because this one is really unusual, as opposed to the extended filing deadline had last year,. You might recall that for 2019 returns everything that said April 15th, was moved to July 15th. Well, not the case for 2020 returns. Most of you might know this, but I just want to remind you, what’s wrong with a little repetition on the due date because I would imagine like me, you’re pretty darn tired, and your brain is pretty mushy, but we’re gonna get through this day together. So what’s to due today? Well, personal returns are due or get those extensions filed. If you have clients that wish to fund an IRA or Roth IRA and it’s for tax year 2020 we had guidance, and we’ve had that in previous blogs that you can see at the University of Illinois Tax School web page. You can look at previous blogs that we got IRS guidance that said yes, IRA funding is going to follow the personal filing deadline. So IRA funding intended for 2020 May 17th. If a client wishes to fund an HSA and they qualified to fund an HSA and they intended also for tax year 2020, which means they also want to potentially deduct it off their 2020 return. That filing deadline is also today, May 17th. If you deal with any calendar year not for profits, those 990 or 990-EZ or 990-N, the postcard filing, those are all due today as well, May 17th. Or as the slide says, we got to get that extension filed today.
Well, let’s then talk about what’s not due today. Well, normally on the filing deadline, quarterly estimated tax payments are due. You may recall last year at the first and second quarter were due along with those personal returns on July 15th. Not so this year. That first quarterly estimate was in fact due on April 15th. Now you might recall from our previous blog, again, you can go to the University of Illinois Tax School website and see the blog. We also had guidance from the IRS which said if we are in fact dealing with a client who has an estimated tax obligation to pay and we are applying a refund from 2020. So in other words, it’s not a payment that’s being made on May 17th, it’s actually refund from taxes paid in or withheld during 2020. Then, in fact, applying that refund to 2021 counts today. In other words, it’s not late because the IRS attitude is “well they had the money.” They (the government) had the money. So applying that refund today still counts as though it was a timely, April 15th first quarter payment. So quarterly estimated tax payments are not due today, but applying refund counts as though they were paid last month. The second quarter is due June 15th. So no sooner are we gonna get done with this filing season, then we got to turn right around and deal with our clients for the second quarter estimate coming up in a little less than a month. If we’re dealing with calendar year C Corporations, they’re not due today, they were due last month, April 15th. So the same is true also of trust returns, trust returns almost always file on a calendar year those 1041’s were due on April 15th. If we have any S Corporations and partnerships, they were due March 15th. There was no extension in the filing deadline for those returns. So if you run across any calendar year C Corporations, any 1041’s for trusts, estates can file on a fiscal year. Where those S Corps and partnerships, well folks, they’re late and you probably are going to have to get your mind back shape as quickly as you can and get those filed as quickly as you can as well.
So what else is not due today? If your client is filing an extension and let’s say for example, they’re a sole proprietor, so they file a Schedule C, or maybe they’re a Schedule F farmer. If they wish to make a SEP contribution and they file an extension today, or you file extension on their behalf today, they can fund that SEP all the way up to that extended due date. So for those sole proprietors, that would be October 15th. If we’re looking at employers who have to match pension plan contributions and they filed an extension, remember I just mentioned about S Corporations and partnerships having that March 15th deadline, perhaps you filed an extension then, or the C Corporation returns that you filed an extension on April 15th. The employer matching for qualified pension plans also follows that extended due date. So keep that in mind as well. FBAR filings again, another one of those that did not receive an additional time to file, they were also due April 15th. If you have anyone who has an FBAR filing requirement because of Foreign Assets that they have, they’re going to need to get those filed as quickly as possible.
So what does filing an extension accomplish? You probably already know this, but again, repetition is not a bad thing. The extension never never never is in time to pay it is in fact in time to file. So a client who owes taxes actually is subject to two potential penalties, one being failure to file, which is what the extension alleviates or at least pushes off the day of reckoning down the road. But it does not alleviate failure to pay. So if the client has a tax amount due and they don’t it get paid, they don’t get it sent in today, May 17th, then they are subject to late payment penalties. Now, I mentioned because the extension gives us an additional time, there’s still a day of reckoning. I remember running across a client some years ago, who comes in to see me like three years after we filed the extension. And he said, “well I shouldn’t have any penalty for filing because you filed an extension for me for that 2015 return.” And I had to explain to the taxpayer that that extension isn’t forever. It’s only typically for five months or six months. But in our case and I want to remind you that as well this year, even though we had this additional month to file, much like the IRS did last year, they are not going beyond the October 15th deadline. So that extension gives us only until October 15th, there’s not an additional month in there.
I found this very interesting and I never really looked this up before and I went straight to a Pub to talk about this situation. I always used to wonder about what happens if I e- file returns on the deadline and they get rejected. I’ll be honest with you, for the 31 years that I’ve been doing taxes, what I have typically done is the day after filing season I take off and I kind of sit at home and probably watch some old movie, but just basically veg on that day after filing season. Typically will come back in the office maybe the next day or maybe even two days later. And that’s when I’m almost afraid to go ahead and download my e-file results to see how many returns rejected. I used to believe that you had three days after a return was rejected in order to fix it and retransmit. Look what I got for you here from Publication 4163 and it’s specifically on page 48, I’m going to read this to you. It said it’s important to note that the 10 day transmission perfection period-did you hear what I just said? There is a 10 day transmission perfection period. Look at this even further, you’ve got five calendar days to fix a rejected extension. So in other words, you still got to get it filed, it can’t be one of these oopsies that you discover on May 20th, that you never filed a return. But if it was submitted either the extension which gives you five more days or the return and they were rejected, you have another 10 days to fix that return and get it submitted, or five more days to fix that extension that was rejected and get it submitted. However, and I thought this was important, and I carved this right out of the Publication 4163. Which basically says that even though you get it fixed and get resubmitted. Look what it says here, you do that within 10 days and be given the received date of the original rejected return, so it won’t be late. But the IRS says that does not apply to any payments that were due also on that date. So you went ahead and you filed a return or you filed an extension on May 17th and for whatever reason, it rejected, you got 10 days to fix a return, five days to fix an extension. But the IRS suggests that if we were also in our software telling the IRS to go ahead and draft a payment with that extension, or a payment with that return being filed, to not use that method, and perhaps for example, go ahead and use other options. And you can look at the Pub to what they suggest, the simplest being maybe printing out a coupon and having the client mail in a check. So you can go ahead and look at this on the website, I gave you the link there for the Publication 4163. I find that very interesting and I’ll be honest with you, somewhat relieved. I’m not really from the standpoint of that one return, that happens every year, that I completely blew it, and didn’t even get the extension filed. But how about some of those returns that the return might reject for whatever reason, we’ve had a huge volume this year of dependents claiming themselves and the parents don’t know it. So you could have that kind of a circumstance where you transmit the return on May 17th. Take a day or so off to regroup in your mind, come back, find it rejected, you got 10 days to fix that. Or even if the extension failed, you’ve got five days to fix that rejected extension. Remember, these are rejected returns or extensions, not the ones that fell through the cracks and never hit at all. Still, the advice from IRS tells us that if you’re asking for a debit situation, an automatic draft out of someone’s bank account, either for their balance due or a payment they want to make with the extension, use another method. Probably sending in a voucher or check the website on the link we’re giving you here in the slide and in the transcript to go ahead and check that out.
Well, ladies and gentlemen, you made it. It’s May 17th, you’re still up right? You’ve got lots and lots of things to face, I know that. We’ll continue to be with you like we always are. I think in future blogs, you may see more written blogs that give you more time to kind of digest it. Remember my intention during the filing season was to give you these video blogs so they would kind of be less wordy. Which you find I’m very windy as I go through this, but hopefully you were able to listen as you go through. Congratulations on getting through another tax season. Stay tuned for more blogs to be coming forward. And we look forward to being part of you and working with you and helping you achieve better goals for your clients. So for all of us here at the University of Illinois Tax School, congratulations. And we’ll say goodbye, for just a while.
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