It has been said the only things certain in life are death and taxes, but lately it surely seems like we can add COVID to the list, too.
April 15 will be here before you know it. COVID had an effect on tax preparations and IRS deadlines last year. With the addition of COVID relief/stimulus payouts this year, you may be wondering how this may affect you. We sat down with Rhonda Siefker (my wife), a local tax consultant/preparer, and gathered some information to help you make it through the tax season.
What options are available to file my federal tax return in a COVID world?
Right now, taxes can be filed electronically by an individual either online or by use of software. A taxpayer may wish to visit a tax preparer virtually or even still in person. Even though the risk is small visiting in person, an individual may not be willing to take that risk.
Will the COVID relief payments, loans or grants made by the United States government affect my taxes?
I’ve been asked this question a lot over the last few weeks. The good news is after much deliberation, the IRS has stated the relief payments and those including loan forgiveness under the Payroll Protection Plan will not need to be reported as income for 2020 tax filings. In addition, deductions paid under the Payroll Protection Plan are still deductible. Like most government policies, there are some minor exceptions.
How is COVID affecting the accounting and tax preparations this year?
Most tax professionals and accountants when visiting with a client in person are still adhering to COVID guidelines of social distancing, wearing a mask when in close proximity to a client and hand hygiene.
Nowadays, tax professionals are being consulted even more than ever, as individuals and small business owners try to understand all the federal COVID stimulus packages, loans and grants.
One of the biggest changes has been the immergence of “Virtual Offices” as computer or phone assisted meetings via FaceTime, Zoom or Skype replace the traditional face-to-face interview. Data is then being transferred in person, mailed with tracking, e-mailed with encryption, and even a photo taken and texted.
The IRS has been moving toward 100% electronic filing of all types of returns for the past several years. Accuracy of returns, time efficiency and less audit risk are among the main reasons to electronically file your return.
The COVID pandemic situation hasn’t affected the IRS’ push as we are seeing most returns of all types being filed electronically to the IRS. Now electronic versions for clients are quickly replacing paper forms and hard copies.
Many taxpayers say storing the files electronically is easier than keeping up with traditional paper copies. However, some still prefer to have a tangible paper copy in hand rather than relying on technology.
Is the electronic transfer of personal data safe?
Practitioners have been tasked by the Internal Revenue Service with insuring data security as files are shared electronically. Encryption software, Multi-factor Authorization and data backups are of the upmost importance.
Technology developments have made this transition easier. Most software applications including everchanging tax software are making strides to help tax professionals and consultants provide these services securely and protecting their client’s privacy.
Will the Internal Revenue Service extend the April 15 filing deadline like last year?
So far, the IRS has not extended the April 15 deadline. Tax preparers and citizens have had awhile to make preparations to work in this “new norm” environment.
Last year, the pandemic had everything in a tailspin. Offices and businesses were closed for the protection of the public, and alternative methods were not easily available yet. The IRS is counting on tax professionals to have measures in place to help taxpayers meet their filing requirements timely.
With COVID and the availability of tax software and free e-filing options, is it necessary to seek a tax professional?
While it is true technology and software makes it easily available for the average person to file their taxes and limits one’s exposures to others, it is also true that most software uses an interview format in order to prepare your return.
If the individual misunderstands the questions in the interview, it could lead to potential and costly errors. I believe if your return is basic and straight forward, then the software available may be a good option. However, if you own a business or have unusual circumstances, I strongly encourage you to seek the advice from a professional. While the costs may be a bit more, it is a good investment in your peace of mind.
What do you mean by tax professional?
An enrolled agent, or EA, is a tax specialist or professional who focuses on managing tax arrangements for business or individuals. EAs generally have a wide range of knowledge in such tax-related subjects as income, business, estate, gift, payroll, levies, returns, inheritance, non-profit and retirement taxes. Once an EAs passed their qualifying exam, the federal government recognizes them as tax specialists.
An EA’s typical responsibility includes representing his or her clients, businesses or individuals before the IRS on issues of audits, appeals or tax collection as well as income tax preparation and planning. An EA is the highest credential the IRS awards. While many also provide other services
Rhonda Siefker graduated from West Texas A & M University in 1998 with a bachelor’s degree in Business Administration with a major in accounting. She has been an Enrolled Agent for over 16 years. She assists farmers and small business owners with bookkeeping and payroll needs as well.