In response to the global COVID-19 pandemic, the IRS took unprecedented actions this year to extend a wide variety of filing and payment deadlines. With offices across the country shut down, quarantines and shutdowns in effect, and many people sick, taxpayers and tax practitioners both needed the extra time.
However, as the pandemic unfolded and lives were disrupted, the AICPA heard from members about a range of problems they were experiencing, including the extra time spent with economically challenged clients; unexpected deadlines due to assisting with Paycheck Protection Program (PPP) loan applications and the PPP loan forgiveness process; and clients, members, and staff being incapacitated with COVID-19.
Throughout the pandemic, the AICPA has been communicating its concerns to Treasury and the IRS about practitioners’ ability to meet various filing and payment deadlines. As part of those efforts, in early July, the AICPA started advocating for relief for taxpayers and their advisers who have been affected by COVID-19 in an unprecedented year. Specifically, the AICPA urged the IRS to automatically waive failure-to-file and failure-to-pay penalties for the millions of taxpayers affected and working through the challenges created by the coronavirus.
Additionally, the AICPA urged the IRS to set up an expedited process to help taxpayers establish or revise an installment agreement, based on current financial circumstances, to be able to more easily comply with their tax obligations. Finally, the AICPA asked the IRS to delay collection activities because of the backlog they are experiencing in processing mail and the effect that backlog could possibly have on the currency of a particular taxpayer’s account information.
Based on its discussions with the IRS in September, the AICPA understood that the IRS would be willing to work with taxpayers who need relief. Practitioners who made a good-faith effort to meet filing deadlines on behalf of their clients, but were unable to do so due to COVID-19, should write “COVID-19” in an attachment to the return, briefly describing the reason they could not meet the deadlines, or, if possible, should write “COVID-19” at the top of the tax return to indicate the need for penalty relief.
Unfortunately, the AICPA is now hearing from members that clients for whom they sought “COVID-19” relief shortly after Sept. 15 are now receiving late-filing notices. The AICPA is in discussions with the IRS about this situation and has requested systemic abatement of late-filing penalties for those affected by the coronavirus. The AICPA has also prepared a template for practitioners to use to request reasonable-cause penalty abatement on behalf of their clients due to COVID-19 difficulties. The template is available free to AICPA members.
— Alistair M. Nevius, J.D., (Alistair.Nevius@aicpa-cima.com) is the JofA’s editor in chief, tax.
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