How to File Extensions, Handle Last Minute Rejections & More

 Here are answers to the most commonly asked questions as the filing deadline approaches:

What is the latest time I can still electronically file a return on the day of deadline and still be considered timely filed?

How do I unlink the state return from the federal so that I don’t have to wait for the federal acceptance before I can file my state?

Do I have to e-file an extension for the state?

Taxwise State extensions: Many states do not require a separate form for extensions if the Federal extension form is filed. TaxWise supports electronic filing for some state extensions. If TaxWise does not support e-filing of the state extension, it must be mailed.

How do I create an extension for an Individual return using TaxWise Online?

How do I create an extension for an Individual return using TaxWise Desktop?

Delay in Processing Form(s) 1040, 1040-X and 1040-ES Payments

 The IRS has issued a Quick Alert stating that it has identified a delay in processing direct debits for Form 1040 balance due, Form 1040-X and Form 1040-ES estimated tax payments submitted via Modernized e-File.  This issue has now been resolved and payments are being processed.

Taxpayer's accounts will be credited with the original requested payment date.  Do not resubmit these payments.  If a taxpayer re-submitted any of these payment requests due to the delay, then call 1-888-353-4537 to cancel the additional payment. Cancellation requests must be received no later than 11:59 p.m. Eastern time, at least two business days prior to the scheduled payment date.

The Quick Alert can be read in its entirety here: IRS Quick Alert.

1120 C returns receiving a diagnostic about the payment date

 

The requested payment date of the amount due with Form 7004 must be after today's date and on or before the due date of the return. (2)

 

These returns are due today, please use this workaround:

 

On the forms tree locate the 1120-EF form

 

 

 

 

Please override this date to 4/14/2021, and create the e-file again

 

Maryland 1040 Returns

 

Due to a last minute scheme change any 1040 Maryland returns will be EFC rejected (response code 49: This type of efile is not currently being accepted by the EFC.  Please resubmit once the EFC has begun accepting these types of efiles) beginning tomorrow 4/15 at 8 am est. We will be releasing the software update to support this change the morning of Monday April 19th. 

Wisconsin Filiers with Federal PTC Repayment

  (from WI DOR, 4/13/21):

If a Wisconsin return was previously filed in ATX and Federal 8962 had a repayment amount, then an amended return is required to reduce the subtraction amount on the WI return.

IRS News: IRS letters explain why some 2020 Recovery Rebate Credits are different than expected

 WASHINGTON − As people across the country file their 2020 tax returns, some are claiming the 2020 Recovery Rebate Credit (RRC). The IRS is mailing letters to some taxpayers who claimed the 2020 credit and may be getting a different amount than they expected.

It's important to remember that the first and second Economic Impact Payments (EIP) were advance payments of the 2020 credit. Most eligible people already received the first and second payments and shouldn't or don't need to include this information on their 2020 tax return.

People who didn't receive a first or second EIP or received less than the full amounts may be eligible for the 2020 RRC. They must file a 2020 tax return to claim the credit, even if they don't usually file a tax return.

When the IRS processes a 2020 tax return claiming the credit, the IRS determines the eligibility and amount of the taxpayer's credit based on the 2020 tax return information and the amounts of any EIP previously issued. If a taxpayer is eligible, it will be reduced by the amount of any EIPs already issued to them.

If there's a mistake with the credit amount on Line 30 of the 1040 or 1040-SR, the IRS will calculate the correct amount, make the correction and continue processing the return. If a correction is needed, there may be a slight delay in processing the return and the IRS will send the taxpayer a letter or notice explaining any change.

Taxpayers who receive a notice saying the IRS changed the amount of their 2020 credit should read the notice. Then they should review their 2020 tax return, the requirements and the worksheet in the Form 1040 and Form 1040-SR instructions.

Here are some common reasons the IRS corrected the credit:

• The individual was claimed as a dependent on another person's 2020 tax return.
• The individual did not provide a Social Security number valid for employment.
• The qualifying child was age 17 or older on January 1, 2020.
• Math errors relating to calculating adjusted gross income and any EIPs already received.

IRS.gov has a special section - Correcting Recovery Rebate Credit issues after the 2020 tax return is filed – that provides additional information to explain what errors may have occurred. Taxpayers who disagree with the IRS calculation should review their letter as well as the questions and answers for what information they should have available when contacting the IRS.

The Internal Revenue Service urges people who have not yet filed their 2020 tax return to properly determine their eligibility for the 2020 before they file their 2020 tax returns. To calculate any credit due, start with the amount of any EIPs received. Use the RRC Worksheet or tax preparation software. Taxpayers who didn't save or didn't receive an IRS letter or notice can securely access their individual tax information with an IRS online account.

Anyone with income of $72,000 or less can file their Federal tax return electronically for free through the IRS Free File program. The fastest way to get a tax refund which will include your 2020 RRC is to file electronically and have it direct deposited into their financial account. Bank accounts, many prepaid debit cards and several mobile apps can be used for direct deposit when a routing and account number are provided. If using a prepaid debit card, check with the financial institution to ensure the card can be used and to obtain the routing number and account number, which may be different from the card number.

For more information, see IRS information letters about Economic Impact Payments and the Recovery Rebate Credit or visit IRS.gov/rrc and the frequently asked questions by topic.

• Topic A: Claiming the Recovery Rebate Credit if you aren't required to file a tax return
• Topic B: Eligibility
• Topic C: Claiming the Credit
• Topic D: Calculating the Credit
• Topic E: Receiving the Credit
• Topic F: Finding the First and Second Economic Impact Payment Amounts to Calculate the 2020 Recovery Rebate Credit
• Topic G: Correcting issues after the 2020 tax return is filed

IRS to recalculate taxes on unemployment benefits; refunds to start in May

WASHINGTON – To help taxpayers, the Internal Revenue Service announced today that it will take steps to automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan.

 

The legislation, signed on March 11, allows taxpayers who earned less than $150,000 in modified adjusted gross income to exclude unemployment compensation up to $20,400 if married filing jointly and $10,200 for all other eligible taxpayers. The legislation excludes only 2020 unemployment benefits from taxes.

 

Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund. The first refunds are expected to be made in May and will continue into the summer.

 

For those taxpayers who already have filed and figured their tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount of unemployment compensation and tax. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.

 

For those who have already filed, the IRS will do these recalculations in two phases, starting with those taxpayers eligible for the up to $10,200 exclusion. The IRS will then adjust returns for those married filing jointly taxpayers who are eligible for the up to $20,400 exclusion and others with more complex returns.

 

There is no need for taxpayers to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return.

 

For example, the IRS can adjust returns for those taxpayers who claimed the Earned Income Tax Credit (EITC) and, because the exclusion changed the income level, may now be eligible for an increase in the EITC amount which may result in a larger refund. However, taxpayers would have to file an amended return if they did not originally claim the EITC or other credits but now are eligible because the exclusion changed their income.

 

These taxpayers may want to review their state tax returns as well.

 

According to the Bureau of Labor Statistics, over 23 million U.S. workers nationwide filed for unemployment last year. For the first time, some self-employed workers qualified for unemployed benefits as well. The IRS is working to determine how many workers affected by the tax change already have filed their tax returns.

 

The new IRS guidance also includes details for those eligible taxpayers who have not yet filed.

 

The IRS has worked with the tax return preparation software industry to reflect these updates so people who choose to file electronically simply need to respond to the related questions when electronically preparing their tax returns. See New Exclusion of up to $10,200 of Unemployment Compensation for information and examples. For others, instructions and an updated worksheet about the exclusion were available in March and posted to IRS.gov/Form 1040. These instructions can assist taxpayers who have not yet filed to prepare returns correctly.