2020 introduced a number of unprecedented situations that have required some massive adjustments. And now, with the tax filing season upon us, a raft of brand new challenges await ahead of the April 15 deadline.
Chief among them: uncertainty around the economic stimulus given to American taxpayers as part of the Coronavirus Aid, Relief and Economic Security, or CARES Act.
Last spring, in the throes of the first round of stay-at-home orders across the country, American taxpayers received up to $1,200 per person, with an additional $500 per qualifying child, of economic stimulus. How much was determined by the number of people in a respective household, and the taxpayer’s or household’s adjusted gross income for 2019 or 2018.
Sounds straightforward so far, right? Well, in a recent virtual seminar I conducted, it seemed that, as many professionals have begun to get their ducks in a row to help their clients in 2021, they’re not finding it to be so simple.
Kerry L. Myers is a clinical professor of forensic accounting and law at the Lynn Pippenger School of Accountancy at the University of South Florida. He is also assigned to the Florida Center for Cybersecurity at the University of South Florida. He earned his Juris Doctorate, with Distinction, from the University of Missouri – Kansas City School of Law and a Bachelor of Science in Business Administration-Accounting, Summa Cum Laude, from Central Missouri University. He is a licensed attorney in Missouri where he practiced law and was a federal prosecutor for many years. He recently retired from the Federal Bureau of Investigation where he served as the supervisory special agent of the Technical Operations Squad.
Christine Andrews is a clinical professor in the Lynn Pippenger School of Accountancy at the University of South Florida, teaching courses in managerial and cost accounting, and business strategy. She has more than 30 years of experience teaching accounting, in addition to a previous career as a CPA. She holds a Doctor of Business Administration degree from Cleveland State University, and an MBA and bachelor's degree from the University of Buffalo. Andrews has published more than 20 times, including in the Journal of Accountancy and the CPA Journal. Her research interests include fraud hotline effectiveness, accounting for environmental liabilities, and other pedagogical issues.
Scott is passionate about developing and unlocking the potential in people, creating a diverse and inclusive culture where everyone can thrive and succeed, and bringing this same passion to solving complex problems. He spent 15+ years at eBay where he was most recently Vice President of Customer Service Technology Solutions. He played a key role in expanding their operations in Utah and co-led the transformation of eBay’s global customer service with a focus on improving the customer experience while decreasing costs annually. Scott attended the University of New Mexico where he studied Business Administration.
Chief among the questions I received was whether a tax professional needs to know how much stimulus a taxpayer received. The answer to that question is “Yes,” and somewhat surprisingly, that creates a potential complication.
Why? Well, for starters, many taxpayers have undergone a series of life-changing events: everything from migrating to virtual work to setting up their kids for remote schooling. As a result, these spring payments seem like they were doled out about 10 years ago. There are a large number of taxpayers who simply don’t remember how big of a check they received from the government.
Of course, along with those checks came documentation that taxpayers may have filed away. But that letter was discarded by many. Why? Some simply did so in haste, while others might not have thought it would be relevant to their 2020 return.
Whatever the reason for a missing paper trail, taxpayers who used direct deposit should be able to track down this exact sum on their bank statement. But for those who were issued checks or prepaid cards, it might cause a hiccup in the process, and in some cases, delay return preparation this spring.
Individuals have their questions, too. After consulting with tax pros, I’ve been told that many taxpayers are unsure if the stimulus was a loan that needed to be paid back. The stimulus, of course, was not a loan and doesn’t need to be paid back to the government, unlike business owners who took out loans as part of the Paycheck Protection Program that haven’t been (or won’t be) forgiven. But the fact that more than one tax professional said they had clients ask could be a harbinger for a season where filers are coming in with a lot more uncertainty than usual.
Now, as a second round of stimulus is starting to hit taxpayers’ bank accounts, it would behoove tax pros and payers alike to be diligent about documenting these payments. Forward-thinking tax professionals can get ahead of a new round of uncertainty by making sure their clients keep thorough records of anything, and that’s important. Because from all early indications, it seems like filing season is going to be filled with headaches: a cherry on top of the 2020 sundae.
