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July 15 filing date — To move or not to move

Shutterstock_294458213“… there is nothing either good or bad, but thinking makes it so.”

— William Shakespeare

I work for a membership organization, and representing our members’ best interests is what we do best. Lately, members have been telling us how they feel about the upcoming federal July 15 tax filing date. We’re hearing both sides of the story, from “don’t you dare alter the July 15 due date” to “everything has got to be extended until ... [pick a date].” It’s clear some members are not interested in any extensions and some want an extension until August, September or October. I’ve even heard November and December mentioned.

Given the unpredictable nature of the pandemic and the different ways it has affected our members, AICPA is closely monitoring the broader environment leading up to July 15 to determine if additional filing and payment relief from the IRS is needed. Just as Shakespeare says, through Hamlet’s lips, everyone has their perception. In this case, what “additional relief” means varies widely. Hamlet was a prisoner of his thinking, and we are considering the July 15 deadline with a measured approach. We have not decided on an automatic extension of July 15 due date and are speaking with members and other stakeholders about their possible need for additional deadline delays.

Whether members anticipate being able to file returns or extensions for all their clients by the July 15 deadline is one of the many determinants of whether an additional IRS postponement is needed. From a tax and practice management perspective, we are aware of members’ concerns about client delays in submitting necessary information, existing work challenges connected to the Sept. 15 and Oct. 15 deadlines and cash flow challenges. The IRS’ ability to provide services must be monitored and factored in, as do state conformity experiences. Members also must contend with an overwhelming amount of legislative and Paycheck Protection Program (PPP) activity for their clients.

The IRS’ filing season data can’t be ignored. For the 2019 filing season:

  • 156 million Forms 1040 were filed by December, with 81 million handled by paid preparers.
  • About 19 million 1040s were extended, and about 11 million of those were handled by paid preparers.

This year, the numbers are startlingly different. For the week ending April 17, 2020:

  • 116 million returns were filed compared to 137 million in the same period in 2019, a more than 15% decrease.
  • For the paid preparer community, about 54 million returns were filed compared to more than 70 million for the same period in 2019, which represents a huge 23% decrease.

We are working with the AICPA’s Tax Executive Committee to analyze this information and more. This work will help us assess the right filing-season path. In the meantime:

  • The AICPA has urged Treasury and IRS to provide more transparency on the IRS operations currently functioning and to use stakeholder input in its strategy for resuming services.
  • The AICPA has also asked Treasury and IRS to develop and share a contingency plan now, in the event additional relief is needed beyond July 15.
  • We’re looking into other areas of concern that indirectly affect filing season, such as penalty relief and the impact of electronic signature (e-signature) acceptance.

The AICPA believes that a penalty infrastructure in a tax system should encourage and facilitate voluntary compliance. We are concerned that the COVID-19 environment may conflict with that overarching principle, and we are considering some form of mitigation. Also, in the interest of the health and safety of taxpayers, tax professionals and IRS employees, we are discussing the need to update the federal e-signature guidance and authentication requirements relating to standard filing procedures.

Shakespeare also said, in the words of Richard III, “Now is the winter of our discontent.” Richard speaks of entering a period of dormancy of his unhappiness and despair, and that birth of a new season is around the corner, when life is renewed. Let’s hope that the challenges of a difficult filing season will pass soon and that good and renewal will feel like they are just around the corner.

For more on the Tax Policy and Advocacy team’s regulatory and legislative outreach, please visit our Coronavirus Resource Center.

Edward S. Karl, CPA, CGMA, Vice President of Taxation, American Institute of CPAs

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