Lee B

New penalty content landing page on IRS.gov: In an effort to provide you with additional penalty guidance to share with your clients, the IRS has redesigned and expanded the penalty guidance content available on IRS.gov. Visit the Penalties web page for information related to many common penalties. https://www.irs.gov/payments/penalties

Although what the details of "payment did not go through" may make a difference.

Your client received an automated response. Chances are good of getting this reversed.

"The IRS reported a “level of service” on its accounts management phone lines of 15%, but only 7% of taxpayer calls actually reached a telephone assistor. On the “1040” line, which is the most frequently called IRS toll-free number, taxpayers made about 85 million calls, but only 3% actually reached a telephone assistor. “When so few callers can get through to a telephone assistor, problems remain unsolved and taxpayer frustration mounts,” Collins wrote."

From The National Tax Advocate Blog: :Backlog of 35 Million Tax Returns That Require Manual Processing As of the end the 2021 filing season, the IRS had a backlog of about 35 million tax returns that require manual processing, meaning employee involvement is generally required before a return can advance to the next stage in the processing pipeline. The backlog includes about 16.8 million paper tax returns waiting to be processed; about 15.8 million returns suspended during processing that require further review; and about 2.7 million amended returns awaiting processing. In contrast to this filing season, in 2018 and 2019, pre-pandemic years, the IRS had a backlog of 7.4 million and 10.7 million returns, respectively, awaiting manual review at the close of the filing season. Of the 15.8 million returns suspended during processing, most were sent to the “Error Resolution System” for further review of specific items. Two of the most common items were “recovery rebate credit” (RRC) claims and Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) “lookback” claims. Although the majority of eligible taxpayers received their EIPs quickly and seamlessly, millions of eligible taxpayers had not received payment as of the beginning of the 2021 filing season. Taxpayers who had not received the full amount of EIP to which they were entitled were instructed to claim the missing funds as an RRC on their 2020 returns. The IRS had to manually verify many of these claims to ensure the amounts were correct. In addition, the IRS had to manually verify returns where the taxpayer elected to use 2019 earnings to claim the EITC or the ACTC. Because of changes to the tax law that took place late in 2020, the IRS did not have time to adjust its systems for the 2021 filing season to allow 2019 earnings to be systemically verified. The IRS Error Resolution System holds these returns in suspense until an employee can manually review the return and verify the RRC claimed on the return or the 2019 earnings for EITC and ACTC lookback claims." The Commissioner testified to Congress that all tax returns received during 2020 have been processed.

The general rule is that unless it specifically excluded from taxable income then it is taxable. Perhaps your state excluded it from state taxable income?

"When To File File Form 1040-X only after you have filed your original return. Generally, for a credit or refund, you must file Form 1040-X within 3 years (including extensions) after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. If you filed your original return early (for example, March 1 for a calendar year return), your return is considered filed on the due date (generally April 15). However, if you had an extension to file (for example, until October 15) but you filed earlier and we received it July 1, your return is considered filed on July 1. The time limit for filing Form 1040-X can be suspended for certain people who are physically or mentally unable to manage their financial affairs. For details, see Pub. 556, Examination of Returns, Appeal Rights, and Claims for Refund."

I have taken 5 or 6 of these free IRS CPE classes over the last several years. The quality of them varies quite a bit. I took one recently about the new Tax Pro Online system which is supposed to roll out next month. It was subpar and not well done. The documentation was just a bunch of screen shots which were mostly unreadable due to tiny little print. On a scale of 1 to 5, I would rate it a 2. On the other hand, last August, I took an intermediate level class on Partnership Basis which was excellent and covered the subject in depth. Frankly it was the best class I have ever taken covering this topic and I learned a lot! I guess I can't complain too much since they were free.

Well I guess this will depend on your payroll software provider. Payroll Relief, which I use for my 2 largest clients says they will not have the updated 941 available until the week of July 12th. Medlin, which I use for all of my smaller clients just made the updated form available this morning.

The IRS just released a new draft version of Form 941 yesterday which is effective 6/21. The final version will not be available until July 12th or later, after which software providers will finalize the necessary changes.

There are other reasons for having an EIN for a SP. Some financial institutions require an EIN before they will open a business checking account. Some owners want an EIN so that they won't have to disclose their SSN for identity security reasons.

TBD

You are correct, I have never used abbreviations so I guess I will have to adapt. IRS Standard Address Abbreviations The following standard address abbreviations should always be used, unless the word is being used as a proper name. https://www.irs.gov/irm/part3/irm_03-024-037#idm139976714724816

https://www.irsmind.com/

Late last week I took a free IRS online CPE class about the new Tax Pro Online System which the IRS will be rolling out next month. The Tax Pro Online System will require both the Tax Professional and their client to have active "Secure Access" accounts set up. A very key issue is that you and your client have to both be using the same address which has to be an exact match with the address in the IRS database. Using abbreviations like St, Ln or Dr won't work.

I have a "secure access" account set up where you can pull up your own transcript which I did yesterday. While the transcript shows all 3 EIP rebates being paid, it doesn't show the date or how the payments were made.

"Request non-assertion of accuracy penalty in an audit or underreporter notice due to reasonable cause: when a taxpayer I audited or has a CP2000 notice, the taxpayer must contest the penalty during the audit or CP2000 process prior to the assessment. Taxpayers need to argue that they made a reasonable attempt to properly report their tax liability. Reliance on a tax pro, ignorance of the law, and other factors can be considered in requesting non-assertion of the penalty. If the accuracy penalty is already assessed, the taxpayer must request audit or CP2000 reconsideration to have the penalty abated."

Too many returns falling thru the cracks, which will be in limbo for many months.

Haven't seen it mentioned.

Substantial Tax Understatement is one of the two Accuracy Penalties. All you can do is tell what happened with good documentation.

May qualify for the Other Dependent Credit

Hopefully, this is not an accuracy penalty because I don't believe FTA can be used with an accuracy penalty. Based on your post, I don't know what the "reasonable cause" would be?

Knock on wood! So far I haven't had any issues arise that has required me to call the IRS I have had to call the Oregon Dept of Revenue 4 or 5 times and gotten thru after 15 or 20 minutes.

Copied from the Office Of Personnel Management website: Holidays for Federal Employees New Year's Day (January 1). Birthday of Martin Luther King, Jr. (Third Monday in January). Washington's Birthday (Third Monday in February). Memorial Day (Last Monday in May). Independence Day (July 4). Labor Day (First Monday in September). Columbus Day (Second Monday in October). Veterans Day (November 11). Thanksgiving Day (Fourth Thursday in November). Christmas Day (December 25

I don't know what kind of assets the pts owns, but if the husband is still alive what is the logic for dissolving the partnership right now ? Given what you have posted so far, I would probably wait until the end of 2021 to switch over the payroll and the pts at the same time.