Prepare for Tax Season 2022
Ready or not, tax season is here…and the IRS says it isn’t ready. The IRS will begin processing 2021 federal individual income tax returns on January 24th. However, while the filing deadline hasn’t changed, the IRS is still reporting being backlogged, underfunded, and understaffed. The COVID-19 pandemic began to highlight some of the problems that existed within the IRS. As federal workers were sent home in March of 2020, the IRS had limited capability for employees to work remotely and no plan to sort through and process mail although the IRS reports having 61,000 working remotely. Now, in 2022, the IRS has issued a statement that they are preparing to accept filings but to be prepared for delays.
In 2021, the IRS had almost 82,000 workers who were tasked with processing over 169 million 2020 individual returns and 53 million business returns. While up slightly from 2019, employee levels are still below where they were in 2010. In adequate staffing has led to delays in processing returns and notices. This delay appears to be most notable for those working on the administration of decedent’s estates. After the death of a taxpayer, their final individual income tax return must still be filed. Any taxes due must be paid before an estate can be closed but also, any refund must be received and processed before an estate can be closed as well. Unfortunately, a Form 1310 is required to claim a refund on behalf of a deceased taxpayer and the 1310 cannot be filed electronically. Thus, there are a great number of estates that are awaiting refunds that are extremely delayed due to limited staff at the IRS and the backlog of mail that occurred because of the pandemic. In addition, many administrators find that a decedent has not appropriately filed income taxes prior to their death. The administrator of the estate can file the past due returns; however, they too must be paper filed which results in a delay in processing. Even once processed, administrators are still waiting for a final calculation of any interest and penalties due; thus, the delays stemming from the IRS are creating significant delays in closing estates all over the country.
The same delays appear to be occurring for those who have responded to IRS notices by mail – which is not surprising given the mail delays. For those preparing to file their 2021 individual income tax returns, there are several tips for a smooth tax season. First, be sure that you have all the information needed to complete your return. Given the processing delays, you don’t want to file an incomplete return and then later must file an amended return on paper. Many investment account consolidated 1099s aren’t finalized until March, therefore, if you are likely to receive a corrected 1099, it is best to wait to file your return. Second, be prepared to file electronically. It appears that the delays the IRS is experiencing is within the review and processing of returns filed on paper. While they are still accepted, electronically filed returns are being reviewed and processed much faster. Finally, be prepared to either pay your balance due electronically or receive your refund electronically. Again, like filing, the processing of any payments appears to be delayed. In addition, a lower staff level is making it much harder to connect with someone on the telephone, thus late payments will be difficult, if not impossible, to get straightened out. Finally, be patient. For those such as an administrator of an estate who are forced to file on paper, have patience. It may be a year or more before a return is processed, but it will get done eventually.
ASK DAN & RIGGS
Hook Law Center: Hey guys – My humans are talking about getting in shape for New Years. Is this something I should think about too?
Dan & Riggs: Hey there! Absolutely – pets can get in shape too and help their humans along their fitness journey. A dog can wear a fitness tracker just like a human and their humans can help them set and meet daily movement goals. Humans can also help their pets stay in shape by measuring out meals and limiting treats. Finally, any type of movement is good for a pet, so scheduling pet play dates is a great way to get fit for the New Year.
Letha Sgritta McDowell
757-399-7506 | 252-722-2890
Letha Sgritta McDowell is a Shareholder of Hook Law practicing in the areas of estate planning, elder law, special needs planning, estate and trust administration, asset protection planning, long-term care planning, personal injury settlement consulting, guardianships & conservatorships, and tax law. Ms. McDowell’s clients range from high-net-worth individuals with over $75 million in net worth to families with limited assets.
Ms. McDowell is a past President of the National Academy of Elder Law Attorneys and was named as a Fellow of the prestigious American College of Trusts and Estates Council (“ACTEC”) in 2020. She is certified as an elder law attorney by the National Elder Law Foundation (“CELA”) and Board Certified as a specialist in Elder Law by the North Carolina State Bar Board of Legal Specialization. Furthermore, McDowell is accredited to prepare and prosecute claims with the Department of Veterans Affairs.
Ms. McDowell is currently the chair of NAELA’s strategic planning committee, a member of the Board of Directors for the North Carolina Chapter of NAELA, and a member of the Board of Directors for the Purdue Center for Cancer Research. She is the former Chair of the North Carolina State Bar’s Elder Law Specialization Committee and is the former Editor-in-Chief of “Gray Matters”, the newsletter for the Elder Law Section of the North Carolina Bar Association. She is a consultant for InterActive Legal and has worked on several law and technology initiatives including IBM’s Watson project. Along with her experience practicing as an attorney, she has dedicated much of her time writing for national publications including, but not limited to: Wolters Kluwer, Wealthmanagement.com, the NAELA Journal, Trust & Estates Magazine and many more.
- Elder Law
- Estate & Trust Administration
- Estate Planning
- Asset Protection Planning
- Long-Term Care Planning
- Special Needs Planning