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.
Justin Tolman is Digital Forensics Evangelist at Exterro. He has over a decade of experience bridging the gap between technical investigation and business strategy and previously served as a computer forensic specialist at the Ohio Bureau of Investigation.
As chief information officer at Wiss, Hrishikesh Pippadipally is responsible for creating and executing technology strategies and roadmaps. This includes leading efforts to build and modernize products and platforms that provide security, flexibility, and scalability, allowing partners to manage operations successfully and deliver services to end users. In addition to the firm's internal CIO responsibilities, he provides his CIO and CTO advisory expertise to clients with IT strategy, digital transformation, cloud acceleration, enterprise architecture, business process optimization, info security, cybersecurity and infrastructure needs. In prior roles, he worked as a senior technology leader with nearly two decades of experience in delivering enterprise-class solutions in the Financial Services industry with a strong understanding of both technology and business.
Berend de Jong is the Global Insurance and Finance Lead at Planet, a leading provider of global, daily satellite imagery and geospatial solutions. Planet is driven by a mission to image the world every day and make change visible, accessible and actionable. Founded in 2010 by three NASA scientists, Planet designs, builds and operates the largest Earth observation fleet of imaging satellites. The company provides mission-critical data, advanced insights and software solutions to customers across agriculture, forestry, intelligence, education and finance, as well as government agencies, enabling users to simply and effectively derive unique value from satellite imagery.
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.
