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If you want to seriously blame someone, blame the elected officials in DC and their appointed servants who created this situation.

Perfectly agree. Perfectly.

I have a retired client who has a similar notice and called IRS THIRTY times and never got through to anyone. Her notice said she could not verify online (she is capable of doing so). This is terrible customer service, and I told her to contact her US rep and senators to tell them to fund the IRS so it can actually serve taxpayers. What a horrible situation for all the recipients of these notices--they're scared that their ID has been compromised and then can't reach anyone to help, all under time pressure. Unacceptable.

Technically speaking a husband-wife LLC can be treated as a disregarded entity but only if in a community property state. The problem is for those not in community property states, then the IRS would be looking for a partnership return. It's been about 6 years since I originally wrote this, but here is a quote that I continue to repost each time this subject comes up:

Where I had the NYS EITC issue is with the Federal Return allowing the taxpayer to use their 2019 Earned Income if that gave them a better EITC they could use the 2019 Earned Income vs 2020. Well NYS does not allow for that, you have to manually change the the earned income for NYS to be the actual 2020 amount, not just the 20% of the Federal EITC. Have many not so nice words for NYS Tax Department for this fiasco including dragging their feet with the Federal Non Taxable UE change. Yes it is Taxable, NO its not, wait we are thinking about it. No, passing legal marijuana legislation is so much more important! /s

I am speechless. My client filed their 2018 return in January of 2020, three months after the extended due date. I requested a waiver of the penalty for medical reasons. My client has a chronic, progressive motor neuron disease, and I have watched him struggle over the past three years. In 2019, during treatment for this disease he suffered tremendously, physically and mentally, and as a result, we were not able to file timely. My request for relief from the penalty attached a letter from his doctor describing the progress of the disease and the effects on his physical capabilities and upon his physical and mental stamina. This was the basis of my argument that he had reasonable cause to file late. The IRS responded, after thirteen months that "the..taxes were not taken care of in a timely manner because the taxpayer is impaired and is no longer able to attend to their personal business. However, if a taxpayer continues to maintain responsibility for their own affairs, they are responsible for taking care of their own taxes." I did not state in my letter that he was no longer able to attend to their personal business. What I did say is that the onset of the disease created a struggle for him to prepare his paperwork in a timely fashion, but that he was ultimately able to do so while learning to live with the limitations imposed upon him by his disease. The final insult is that I also requested an abatement of the penalty using the First Time Penalty Abatement Waiver. They denied it as they said a review of his account history shows that 'we have charged similar penalties in the past'. They have not. I will take this to the Office of Appeals, but I am very angry. Is this simply the IRS, overworked, denying all requests for a waiver of penalties? It took them over a year to respond, with them sending correspondence saying we need another XX days to respond. My client will be confined to a wheel chair soon. He has filed 2019 and 2020 timely, but I am aware of the weekly decline in his ability to handle his affairs. What a sad situation and it is amplified by the IRS's illogical response. It is illogical in my opinion, but I am not sure how to argue about their position. Obviously he was ultimately able to handle his affairs, he simply could not get it done in a timely fashion.

Copied from the IRS Mind website: "Many penalty abatement requests are denied – requiring the taxpayer to appeal the adverse decision: the IRS uses an automated decision-making tool to make penalty relief determinations. This tool is flawed and often produces incorrect adverse penalty determinations. Taxpayer often receive adverse penalty abatement determinations that appear not to consider all of the facts and circumstances. Taxpayers should appeal their decision to the IRS in order to have the entirety of their circumstances considered."

I read today that IRS is ignoring the 30-day thing and allowing taxpayers to verify beyond that time limit. But the poor frightened people don't know that! I wonder why the online system is down. A few years ago the system to recover an IPPIN was disabled as was the sharing function for the FAFSA because the ID thieves had enough info on the taxpayers to answer the questions no problem. Did it happen again?

Given the details you provide this sounds like a knee jerk response. I think you would have a very good chance of getting this reversed in appeals..

"Rev Proc 2013-30 facilitates the grant of relief to late-filing entities by consolidating numerous other revenue procedures into one revenue procedure and extending relief in certain circumstances. This procedure provides guidance for relief for late: S corporation elections, Electing Small Business Trust (ESBT) elections, Qualified Subchapter S Trust (QSST) elections, Qualified Subchapter S Subsidiary (QSub) elections, and Corporate classification elections which the entity intended to take effect on the same date that the S corporation election would take effect. Generally, the relief under the revenue procedure can be granted when the entity fails to qualify solely because it failed to file the appropriate election under Subchapter S timely with the applicable IRS Campus and all returns reported income consistently as if the election was in effect. For purposes of this guidance, the “effective date” is the date the election is intended to be effective and cannot be more than 3 years and 75 days from the date relief is requested. To assist in determining if an entity qualifies for late election relief, Rev. Proc. 2013-30 includes flow charts, as well as specific guidance for each of the five categories listed above. If an entity does not qualify for relief under Rev. Proc. 2013-30, the entity may request relief by requesting a private letter ruling. The procedural requirements for requesting a letter ruling and the associated fees are described in Rev. Proc. 2021-1 PDF) (or its successor). Again, it is important to know that Rev. Proc. 2013-30 relief is only for late elections that would otherwise be valid. For example, the S election must still contain signatures from all the shareholders. Also, if there was an invalid shareholder or the corporation was not qualified during any part of the tax year, the S election is not valid for that year."

"Them's" is us, except we are likely a bit smarter than to run for office in the sound bite and social media world we live in.

It seems like we tax pros and taxpayers have zero representation anymore. Somebody should have seen this coming. And these slow refunds are blowing up my phone and emails wondering where the refund is.... even though they have checked and it's being processed. This is causing even more calls to the IRS. It's awful.

If the IRS was aware they would be incapable of handling the incoming calls to verify taxpayer identifications, why send the notice in the first place? They have to realize the potential angst this can cause individuals...maybe that isn't taken into consideration?? Certainly, the IRS may need more funding, they may deserve more funding. With that said, it's doesn't excuse them from poorly planned and implemented initiatives. I agree, Sara...notifying your representative in this case is a prudent move. They should be made aware of the issues their constituents are dealing with. Crazy.

I have had several get the notice for either 2019 or 2020. Nothing unusual about their returns. One couple I know of ignored it (2019 return e-filed in March 2020), and they got their refund about six months or so after filing. Lucky for me, they only called me twice BEFORE they got the notice, then not at all after. /s

The federal notice is a bit different than the Virginia notice. The federal notice does give a time limit of 30 days to respond, although I don't know what happens after the thirty days. I have an older client who hasn't filed for a few years who got this notice. To do the online verification requires an email address, which he did not have. I set one up for him for this purpose. But then you have to have a credit card or mortgage as part of the verification, and he does not have that either. WIthoug that, you have to call the number given in the notice to verify your identity. We have tried three times when he was here, and could not get through to anyone any of those times. Nor could we remain on hold - we were told they were too busy and to call back another time. I don't know if or when he will get his refund so if anyone else has suggestions, please post them.

Our firm has taken the position that we will not recommend that clients take the money or opt out (except in cases where 2021 income is certain to be above eligibility). We wrote a generic email to respond to client queries that explains that there is an enhanced CTC and that half of it will be paid in advance for taxpayers within certain income parameters. Receiving it may lower their 2021 refund, or if their income rises above the limits in the IRS letter, they will have to pay some or all of it back. If they think their income will rise or they like the idea of a big refund all at once, they might want to opt out. If they need the money now, they might choose not to opt out. (We are not calculating their amounts or making the decision for them!)

"Taxpayers who do not wish to receive the advance payments, whether for changes in income, status of dependents, or otherwise, will be able to opt out of automatic advance payments in order to avoid having to make a year-end repayment. The unenrollment process will be completed via a tool on the online IRS portal; however, this feature is not yet available as of their June 7, 2021, announcement and any alternate means to opt-out in the meantime have not been provided. A similar tool to be released later in 2021 will allow taxpayers to update relevant income and dependent information on the IRS portal so that they may receive a more accurate monthly credit payment."

Bingo! This will be the issue. How many people are just going to treat this like the "free" money they got last year? Assume a client gets enhanced UI for 6 months, advanced CTC and works for 6 months. What are they going to say when you tell them they have no refund coming cause they got it during the year? This is going to be a bloody year for the chains (Block, Liberty, JH). They live off the quick turnaround, big refund checks and advancing loans off of the refunds. But then again, the President and Congress could decide that this is still unprecedented times and forgive the payback on the tax credits and allow UI to go untaxed for another year. We saw it before and we may see it again. Tom Modesto, CA

I could be wrong, but I seem to remember from an update course that unlike the stimulus payments, the advance child tax credit will have to be paid back if 2021 income is not what the IRS calculated the credit on. This year I had a few clients who could not come up with how much stimulus they got, but when I looked at their 2020 income and realized they were not going to get any more anyway, I just plugged in the standard amounts or entered zeros. (Say they really got $1k instead of $1200, but their 2020 income was too high to get anything, it made no difference what I put in there because they were definitely not going to get a recovery credit.) We won't be able to do that with the advance child tax credit in 2021 and will have many clients moaning when we present their tax bill. Right now we don't know enough about it to warn them. The IRS may do that, but how many people won't read it because they are thrilled by the thought of getting extra income?

Actually several years ago I declined to take on young lady, a daughter of some long time clients, who was sharing custody with her ex spouse. I just don't have the necessary experience and expertise to deal with these issues. It's consumes way more time than I can bill. In recent years as a one person office, I have decided to stay within my limitations. In addition I don't do Estate and Trust Returns or any nonprofit work.

I really see this being a nightmare for divorced parents who take turns claiming the dependent. And for the tax preparers who need to know how much they got during the year.

Here's more information than you probably wanted to know: "There have been important changes to the Child Tax Credit that will help many families receive advance payments starting this summer. The American Rescue Plan Act (ARPA) of 2021 expands the Child Tax Credit (CTC) for tax year 2021 only. The expanded credit means: The credit amounts will increase for many taxpayers. The credit for qualifying children is fully refundable, which means that taxpayers can benefit from the credit even if they don't have earned income or don't owe any income taxes. The credit will include children who turn age 17 in 2021. (Important difference from the old CTC.) Taxpayers may receive part of their credit in 2021 before filing their 2021 tax return. For tax year 2021, families claiming the CTC will receive up to $3,000 per qualifying child between the ages of 6 and 17 at the end of 2021. They will receive $3,600 per qualifying child under age 6 at the end of 2021. Under the prior law, the amount of the CTC was up to $2,000 per qualifying child under the age of 17 at the end of the year. The increased amounts are reduced (phased out), for incomes over $150,000 for married taxpayers filing a joint return and qualifying widows or widowers, $112,500 for heads of household, and $75,000 for all other taxpayers. (I wonder whether the reduced amounts are still available with the higher phase outs) Advance payments of the 2021 Child Tax Credit will be made regularly from July through December to eligible taxpayers who have a main home in the United States for more than half the year. The total of the advance payments will be up to 50 percent of the Child Tax Credit. Advance payments will be estimated from information included in eligible taxpayers' 2020 tax returns (or their 2019 returns if the 2020 returns are not filed and processed yet). The IRS urges people with children to file their 2020 tax returns as soon as possible to make sure they're eligible for the appropriate amount of the CTC as well as any other tax credits they're eligible for, including the Earned Income Tax Credit (EITC). Filing electronically with direct deposit also can speed refunds and future advance CTC payments. Eligible taxpayers do not need to take any action now other than to file their 2020 tax return if they have not done so. Eligible taxpayers who do not want to receive advance payment of the 2021 Child Tax Credit will have the opportunity to decline receiving advance payments. Taxpayers will also have the opportunity to update information about changes in their income, filing status or the number of qualifying children. More details on how to take these steps will be announced soon. The IRS will provide more information about advance payments soon."

General Announcement: If you have kids, I ain't doing your return anymore. It's bad enough to have to do the 8867 for every return with a kid and a child tax credit or a education credit. A bigger pain when EIC triggers. But this is really going to be a nightmare!

Hopefully, they'll be sending 1099-Gs at the end of the year. Clients aren't going to remember any of this at the end of they year.

The IRS deserves some kind of award for what they've done this past year and what they're still doing.

Just what the IRS needs, more stuff to do without the resources to do it!

tried the pract priority line, was told too busy, call back