Tax Season 2021 Gets Even Uglier

Tax practitioners tell CPA Trendlines it's a “nightmare.”

The IRS is narrowing the gap between this season and 2020, still behind in almost every area but with more deficits now in the single digits. That’s what passes for good news these days.

MORE: Another Tax Season from Hell? | Pros Process 44% of Tax E-filings | Tax Professionals Report Tough Slogging | Busy Season 2021 Gets Off to Weak Start

Meanwhile, tax practitioners are reporting further deteriorations in their busy season, with 35 percent now terming is “much worse” than the year-ago, up about 11 points from the earlier soundings on the CPA Trendlines Busy Season Barometer. Join the survey. Get the results.

On March 17, the Treasury Department and IRS announced the 2020 individual federal income tax filing due date would be automatically extended from April 15 to May 17. Since then, some 25 states and localities – but not all – announced similar extensions.

BUSY SEASON RED SHIFT: The percentage of tax practitioners reporting a “much worse” season than last year grew 11 points to 35% from before March 15 to after March 15. (CPA Trendlines Busy Season Barometer)

ON THE FRONT LINES (clockwise from top left): Hundshamer, Jones, Mills, Lopez-Williams, Mauro, Raboin, Newman, Behar

Shock and Awe

On the front lines, tax practitioners are meeting the challenges with something akin to shock and awe.

“The extension to May for filing and payments is a big help,” says James F. Hundshamer, a CPA in Glendora, Calif. But, he adds, “it does not go far enough. The first estimate payment is still due 4-15-21. This still means obtaining information and calculating the amount due before 4-15 for those who typically pay 100% of the prior year’s tax to avoid penalty. Without this change, we are still in full gear.”

In Woodland Hills, Calif., CPA David Newman calls the new May 17 due date “a major nightmare.” He sees “no way to get all of the work even closely done by then, and also a major problem getting 2021 quarterly estimates out by 4/15/21.”

The alphabet soup that makes up a normal tax practice has turned bitter for CPA Grace M. Lopez-Williams, who runs a bi-lingual English-Spanish practice in Norcross, Ga., with a strong clientele of Mexican emigres. “PP, APP, ERC, grants, and taxes!” she says. “Too much!”

In Ogden, Utah, enrolled agent Jacques Behar, says last year’s tough season will be “Nothing!” compared to this year’s. “This season is going to be hell right up until midnight on 10/15/21 and beyond because of amended tax returns that I will then need to file.”

The Original Tax Doctor in Des Moines, Iowa, Tony Mauro reports his “revenue from tax is down about 25% thus far. Also, the number of returns is down.”

CPA Cheryl A. Raboin in Newport, Vermont, has a list of problems: “PPP. Tax changes. Waiting for software. Need to amend returns in the middle of tax season because of the retroactive tax law change.” She’s “very disappointed with the May 15th deadline change. It is just for show! Without extending estimates, it is a worthless extension and a huge blow to tax preparers. The IRS and the rest of the government are given a pass on being late because of COVID. This extension amounts to showing no respect for taxpayers or preparers!”

Roger L. Mills at ADF Accounting in Kalamazoo, Mich., agrees, citing “severe legislation on two occasions, with retroactive changes signed into law in the middle of tax season.”

At Jones, Jones, Davis, and Assoc. CPAs in Augusta, Ga., they’re getting hit from all sides. Thomas W. Jones, CPA/ABV, PFS, CFP, CVA, and managing director of tax, estate planning, and business valuations, says some “professional staff are sick with COVID.” Then there’s “PPP #1, PPP#2, PPP Loan Forgiveness, Employee Retention Credit, the IRS sending out erroneous levy notices since they have not opened the mail sent in October 2020 and cashed the check, and the American Rescue Plan 2020 tax provisions mean we have to re-do returns for unemployment benefits.”