Tax Season update.

It is a very challenging tax season. Delayed refunds seem to be the norm right now.

Frustration is my middle name.  I am not the only one.  In an unusual posting, the IRS alerted taxpayers and professional practitioners last week that the Where's My Refund? feature and other related applications may not be available due to the extra-high volume of inquiries during the Presidential Day holiday. To avoid disruptions, the IRS requested that taxpayers check on their refund status only once a day.  It didn’t matter.  Their website was down most of the weekend and remains an unreliable source of refund information. The warning is now a permanent posting on their website.  What was once touted as an improvement appears to nothing but wishful thinking on their part. As a side we can access our own internal database for you to check on the status of your tax return with apparently more reliability than you can through the IRS website.  

We continue to encounter rejected e filed returns for no reason. Just last week IRS allowed us to file personal returns with education credit forms.  However, as quickly as they announced the acceptance of these returns, they then emailed me to announcing that additional time will be required to process these returns as they work out the bugs.  They fixed it last week finally.

Forms required to file your business return appear to be almost ready to be ready to be released to file by IRS. The AICPA trade group just released an open letter to the IRS concerning “the impact the delays in forms releases will have on the processing of partnership, S corporation, C corporation and other business returns due on March 15.”  They have requested an elimination of late filing penalties.  Perhaps responding to the growing pressure from the tax practitioner community the IRS has finally announced that they will be giving us a go ahead to file returns that contain the delayed forms sometime this week.     

Despite the problems we are steadfast in our commitment to ensuring that through this unusual, time-challenged tax season, we will continue provide you with the high-quality product and service you expect.

Important information about your Corporate Income Tax Return.  The due date for your corporate 2012 is March 15, 2013.  My office will file an automatic six month extension on your behalf prior to that date.

If you haven’t started assembling your 2012 tax information now is probably a good time to get started April 15th is closer than you think.  Back in October I wrote “corporate extensions ended last month and I spent the last few weeks preparing and filing returns for the remaining stragglers.  I have to tell you how amazed I was to find people starting to organize last years’ figures, some that were incurred more than 19 months ago.  I don’t think I can remember what I spent last week let alone more than a whole year and an half ago.  In the old days we built our business on bookkeeping....an era before desktop computers and the internet.  Nowadays the computer has revolutionized your small business recordkeeping.  Here are three options, all involving computers, you can try to make things a little easier.  Don’t struggle.  Don’t miss out valuable deductions.  Make record keeping part of your daily routine.”

If you are looking for some help putting together your business information I strongly suggest that you check out our blog post from October 1, 2012.  I will post a link to that post again on our blog.

One additional note we anticipate a big crunch this year come April 15th.  We appreciate your patience and understanding.

Our office hours remain extended until April 15th.  We are open Monday-Thursday 9-7, Friday 9-5, Saturday and Sunday 10-1.  Weekend hours are subject to change based on workflow.

Even more information about form 8867 isssues

Here's yet another version of what we might be on our collective horizons. This is a cut-&-paste from the Refund Advantage website. (If this has already been posted, a thousand pardons.)   February 17, 2013 - IRS Delaying Refunds for Some EITC Taxpayers

Last week, the IRS reported that a large number of tax returns containing Form 8867 (Paid Preparers Earned Income Credit Checklist) were submitted with "incomplete" information, particularly during the first week of the filing season. There appears to have been confusion in the opening days of the season as to the exact requirements of this form and of the IRS. This caused confusion for the tax software companies and EROs. In the last few days, the IRS has apparently now begun sending letters to taxpayers in cases where the Form 8867 was not completed to the satisfaction of the IRS. In these letters, the IRS notes that some of the required entries on lines of Form 8867 were missing. What is confusing for the taxpayer is that these lines are supposed to be completed by the tax preparer (not the taxpayer). For example, line 24 is a question to the preparer that asks the preparer "Did you ask this taxpayer any additional questions that are necessary to meet your knowledge requirement?" The letters from the IRS instruct the taxpayer to provide answers to certain questions on Form 8867. The letters go on to tell the taxpayer that if they do not respond to the letter, their refund may be reduced. And, if they do respond, their refund will be issued in about 6 to 8 weeks from the time the taxpayer provides "responses" to the requested lines on Form 8867. The IRS allows taxpayers to provide responses by fax or by mail. Blog posts at various web sites reveal that this problem has affected many preparers nationwide. In these posts, preparers appear frustrated that the IRS has delayed these refunds and sent letters to their taxpayers that seemingly serve to confuse the taxpayers. In most cases, taxpayers receiving the IRS letter mentioned above will have their entire refund temporarily held by the IRS. But in other cases, the IRS may pay the non-EITC portion of the refund, and have delayed only the EITC portion of the refund.

Where's my refund?

February 20, 2013 - Form 8867 Earned Income Credit Checklist (updated)

Early in the filing season the IRS accepted a large number of returns containing Form 8867 (Paid Preparers Earned Income Credit Checklist) even though the Form 8867 contained incomplete information. Refunds related to these returns have not yet been released by the IRS.

In a number of these cases, the IRS has inadvertently mailed the taxpayer a letter, asking the taxpayer to provide the IRS with Form 8867 by fax or mail. The IRS has indicated that these letters were mailed to taxpayers in error, and it is believed that taxpayers DO NOT need to reply to these letters in order to have their refund released by the IRS.

The IRS is working on resolving this problem, and has indicated that refunds which have been delayed by the IRS due to this nationwide problem should be released soon, possibly within the next week.

The IRS has reminded EROs that they should keep a completed copy of Form 8867 for each taxpayer claiming EITC. But, taxpayers or EROs do not need to fax or mail copies of this form to the IRS in order to have their refund released.

More importantly...

We continue to work closely with the IRS on the issues related to Form 8867 with missing information on lines 22 and 23, e-filed before February 8th.  The IRS is working around the clock and making great progress processing returns with Form 8867.  They are working on processing and refunding all impacted returns on a "first in, first out" basis, starting with returns filed on January 30th and then moving on to those filed in early February.

We know that the timing of your clients' refunds is extremely important. Based on the latest information available, the number of these returns being refunded by the IRS will continue to accelerate over the next several days. The IRS has stated that they plan to process all remaining affected returns that were filed between January 30 and February 7^th by the end of this week.

Februrary 8, 2013 Client Newsletter

I started writing this newsletter right at the end of December 2012.  And then the crush of the workload in January got in the way.  January is the second busiest month of the year for your tax guys. We have prepared, filed and sent to our clients hundreds of W-2, quarterly taxes, and 1099 forms last month. We sent out most forms to our clients earlier than ever this year.  Not to say that this is a surprise.  It’s not.  I have doing this stuff for more than 30 years but this seems to be a little more difficult this year.  The IRS is the culprit of course.

You may have heard about the major delay in starting tax season this year.  Traditionally the start of tax season is January 15th.  But with the last minute “Fiscal Cliff” tax legislation IRS arbitrarily pushed back the day it would start processing “some” tax returns to January 30, 2013. It then announced that it will no longer tell us when refunds would be deposited in a client’s checking account substituting a three tiered notification system found on the internet that seems to be offline more than it is online.  

Virtually every business return that we will prepare has some sort of depreciation calculation.  IRS will not start accepting 2012 tax returns with depreciation until late February, 2013 or even worse March, 2013.  

Instead of encouraging you to bring your tax information in early as we have done in the past,  you hang on until we learn when the IRS will begin accepting them.  We will keep you posted.

My wife Cindy and I flew to Florida on Southwest Airlines last December.  On the back of our boarding pass jacket was printed “We do things differently  (aka better) at Southwest Airlines.”  I liked that slogan so much that I stole it for us to use.   

Southwest Airline success in an industry filled with bankruptcies and failures is truly amazing.    As Warren Buffett once wrote in a letter to shareholders, “If a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”  Since the late eighties, every major airline in the country has gone bankrupt—except one, Southwest. As the United States' largest (in terms of domestic originating passengers carried) low-fare, high frequency, point-to-point carrier, year end financial results for 2011 marked Southwest's 39th consecutive year of profitability.

Other airlines have been jealous of Southwest's success and its relationship with its customers and employees for years. And no one seems to be able to get to the bottom line of what they do operationally and financially that makes them a success. Maybe there is nothing more, it's all just a matter of operating efficiently and keeping employees and customers happy. In fact, many start-up airlines now use Southwest as their template for operating their airline.

What are the ingredients that have made Southwest Airlines such a consistent success story? This is an airline that has defied industry norms of either red ink on the bottom line or very low profit margins of 1-4 percent. The airline invented its own business model avoiding the usual management fads such as business process re engineering, total quality management, change management and balanced business scorecard, among others.

The one thing that Southwest has done that has made them stand out in the airline industry was not to charge a checked bag fee.  This one brilliant decision has made them stand out from their competitors. With the perception that airlines are just a commodity business, not charging for bags has made a tremendous difference in their bottom line.  In fact not paying for three check bags was the basis for our decision to fly Southwest in a completely filled airplane, on an itinerary that took us first to Baltimore and then to St. Louis instead of their competitors.  

Small business owners struggling to establish their businesses under the weight of ridiculous laws and red tape and big businesses that seek to reap monopoly or oligopoly profits will take comfort from the realization that with persistence, perseverance, determination, self-confidence, hard work and the desire to provide exceptional services to customers using dedicated and motivated workforce, they will always win in the end.

And that’s Southwest's recipe for success in a very tough business world.  When was the last time you read a tweet, facebook update or blogpost about someone being happy about paying $25 dollars for their luggage to fly with them. Being different is better.

IRS to begin accepting some business tax returns February 4, 2013

I received this email from the IRS this afternoon.


Many businesses will be able to file their 2012 federal income tax returns starting Monday, Feb. 4. Filers of forms affected by January tax law changes will need to wait until late February or early March.
The Monday opening covers non-1040 series business returns for calendar year 2012, including  Form 1120  filed by corporations, Form 1120S filed by S corporations, Form 1065  filed by partnerships, Form 990 filed by exempt organizations and most users of Form 720 , Quarterly Excise Tax Return. This includes both electronic filers and paper filers.

While many businesses will be able to file starting Feb. 4, there are a number of business forms still being updated for 2012. The IRS will announce soon when individual and business taxpayers can begin filing returns that include any of the delayed forms. Processing of these forms were delayed while the IRS completes programming and testing of its processing systems to reflect changes made by the American Taxpayer Relief Act (ATRA) enacted by Congress on Jan. 2.

 Our emphasis.

A full list of the affected forms is available on IRS.gov.

In addition to the forms listed on IRS.gov, filing of two other business forms is affected by the delay, but only for electronic filers. Businesses using Form 720 and filling out lines 13 and 14 cannot file yet electronically, but they can file on paper. Other Forms 720 are being accepted electronically. In addition, Form 8849 Schedule 3, Claim for Refund of Excise Taxes, is not currently being accepted electronically, but it can be filed on paper.

Additional information will be posted soon on IRS.gov.



Good news and still kind of bad news.  We already have prepared some corporate returns. Unfortunately they still sit on our computers ready to get the go ahead and file the return signal from mother IRS.  Obviously we received the go ahead today.  Unfortunately the delay in updating the depreciation forms
(that is one of the delayed business forms mentioned above) means that the vast majority of business tax returns cannot be filed until February or even March.  That means the delay still exists for the vast majority of our clients business and corporate tax returns.

This delay has left our poor software developer in a catch 22 position.  How do they build the last minute changes into the software and still satisfy....the chomping at the bit clients and tax preparers anxious to find out their results....IRS seemingly ignoring the pressure the already too short filing season has placed and still no notice of extending the due for taxes this year.