How Do We Avoid ACTC/EIP3 Armageddon?

Technical topics regarding tax preparation.
#1
Dbertke  
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So as we get closer to full go with tax season, I am becoming more and more concerned with how we are going to reconcile the Advance Child Tac Credit payments and the EIP3 payments on the 2021 tax return. I feel as a firm, we have been pretty proactive about this:
1) We mailed our clients information about the ACTC payments back in June, including a schedule that they could fill out showing the payments that they received each month.
2) We encouraged clients to sign up for an IRS Online Account over the summer so they could see the payments that the IRS says they should have received
3) We included the schedule that we mailed back in June with our tax organizers that were mailed in December stressing the importance of having this payment information
4) We sent another email/web post earlier this month informing clients that they should be on the lookout for Letters 6419 and 6475.

My concern right now is that the IRS says that they started mailing Letter 6419 the last week of December. Yet no one I know has received one. The disaster that was last year's EIP 1 & 2 reconciliation and how less than 25% of my clients received any sort of letter from the IRS regarding the payments they received is still fresh in my mind. I don't place a whole lot of faith that the IRS will push these out as they promise.

So I guess the alternative is for the client to set up an online account to access the information. Well the IRS now requires all new users to use ID.ME to set up these accounts (users that were set up under the old system will be required to change to ID.ME this summer I believe). I went through the process of trying to get my wife set up on this last night. After two failed attempts where it didn't recognize her, the site suggested a video call. The wait time for this was 2.5 hours. I honestly can't imagine any of my clients having the patience for this.

So I guess my question are any of you as worried about this as I am? Are you doing anything differently to plan for this
 

#2
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Well, I wasn't worried because when the IRS said they were going to do this, I assumed they would follow through. Yes, I'm concerned because knowing exactly what the client got is not as simple as EIP 1 or 2.
 

#3
kathyt  
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I have clients who wanted to opt out but when they got to the face scan part of ID.ME they quit - a lot of people find that creepy. Anyway IF all of the payments were direct deposit it shouldn't be too hard - just get the bank statements showing the direct deposit. That's my thought anyway. Now for people who received one or more checks rather than direct deposit, well that is a problem if they don't have the letter or the online account - we could get a POA or an 8821 and get it ourselves, but that would be quite a delay in waiting for the POA to get processed (if the client doesn't have an account we have to do it the old way which means a few weeks to process). But when it comes down to it - if they didn't keep track of it, well it's on them - they were all warned of the importance.
 

#4
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I put the responsibility on the client.

They can either:

(1) upload their IRS letters
(2) login to IRS account (for EIP3) or use the ACTC portal (for ACTC), or
(3) upload each applicable bank statement with the applicable lines highlighted.

I make it clear that this information needs to be accurate or it can cause problems and notices. I remind them that responding to notices and "problems" is not within the scope of their engagement and I bill for time used.
 

#5
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We are asking all clients to give us the IRS letters.

We're also asking all clients to write down the amounts they got, on their yearly update form.

Also, a few weeks ago, we sent a Form 8821 to every single client so that we could check the transcripts. (This is benefits beyond from the stimulus money; it works great for verifying estimated tax payments, which is another problem area, and getting wage & income transcripts if it's an extension.) We've already gotten about 40% of them back, signed, and we've sent them to the IRS.

If all 3 of the above methods fail, we will assume that they got the maximum amount that conceivably could have been possible from the data on their 2019 & 2020 tax returns.
 

#6
Bob A  
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Agree with the sentiments, difficult road ahead, we offer a "Guide" on our website, asking for the 6475 and the 6419, asking for 1095-A and blah blah blah, remind them when they call for appointments, and inevitably we don't get everything we need for all the same reasons mentioned here, but it's just how it is, it's simply how it's gonna be, we accept it, we suggest extensions sometimes, we do the best we can. We offer input as to how each tp might secure the necessary data (portal, letter, etc) and we raise our fees accordingly, reconciliation takes time, and I wish every one of you well, I hope you each prosper, and I so appreciate your collective brain power, lost without you all...
 

#7
Frankly  
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The disaster that was last year's EIP 1 & 2 reconciliation and how less than 25% of my clients received any sort of letter from the IRS regarding the payments they received is still fresh in my mind. I don't place a whole lot of faith that the IRS will push these out as they promise.

Consider that IRS/Treasury/President DID mail the letter, and TP tossed it in the trash because it looked more like political grandstanding and didn't appear to have anything to do with preparing a tax return. If it had been labeled something like "1099-STIM" then TP might have been less likely to trash it.
 

#8
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I'm preparing my first individual return for 2021 and already there's an EIP3/6475 problem. The client included the IRS Letter 6475 sent to him showing $1,400 as the EIP3 payment made. He included a copy of his bank statement for March 2021 and there a direct deposit clearly labeled "IRS Treas 310 TAXEIP3", but is only $1,278. I went back to his 2019 tax return and calculated $1,278 as the amount he should have received because his 2020 tax returns had not been filed yet.

Based on preliminary 2021 numbers, he is entitled to the full $1,400 and he has never received the additional $122. How is it possible for the Form 6475 to report the wrong payment amount like this?

If I report $1,278 on his 2021 return as the amount of the EIP3 payment and claim a $122 recovery rebate, I'm confident it will hold up his refund, at a minimum. Any thoughts about what to do to resolve this ahead of time if possible?
Last edited by Taxalmancer on 24-Jan-2022 2:31pm, edited 1 time in total.
 

#9
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Taxalmancer wrote:I went back to his 2019 tax return and $1,278 is what he should have received because his 2020 tax returns weren't filed yet.

Based on his 2020 return, he is entitled to the full $1,400 and he never received the additional $122.


Are you absolutely sure that he didn't receive the extra $122 after filing his 2020 tax return? The IRS was making those adjustments and it could be easy to miss on a later bank statement.
 

#10
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EIP 3 may have included true-up payments later in the year, up until Dec 31st.

This happened for a few of my clients that extended. The first payment was based on the 2019 return, and when we filed later in the year, the 2020 return gave them a higher calculated EIP 3 amount. The IRS deposited the difference shortly after the 2020 extended return was filed.

I'd bet your client has an additional $122 deposit somewhere, or a $122 check was mailed to him.
 

#11
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I assumed the IRS would have deposited the additional $122 but it is not in his bank statements through December (I checked them) and he checked his January 2022 online bank account.

I assumed the IRS would deposit the remaining amount. I'm confident saying the $122 never went into this guy's account. If they mailed the check, there's no way to check it at this point short of setting up that IRS account. He's fastidious about his records so I doubt he received a check.

I'm not concerned about the amount but the principle that a highly-organized client cannot reconcile to the IRS letter amount.
 

#12
EZTAX  
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Spidell notice went out saying some of the letters have an incorrect amount. Are we having fun yet?
 

#13
Joan TB  
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Taxalmander - does your client have more than one account that said deposit could have gone into? Just make sure you/he checks ALL of them.

Just an aside - I was amazed at how many of my clients SWORE UP AND DOWN that they never got one of the stimulus checks, but when they bring in their bank statements, I spot it in less than 10 seconds.

Don't they wonder at the time who gave them some money???????
 

#14
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Joan TB wrote:Taxalmander - does your client have more than one account that said deposit could have gone into? Just make sure you/he checks ALL of them.

Just an aside - I was amazed at how many of my clients SWORE UP AND DOWN that they never got one of the stimulus checks, but when they bring in their bank statements, I spot it in less than 10 seconds.

Don't they wonder at the time who gave them some money???????


Ditto. Then get mad at you because you made them bring in the statements.
 

#15
CathysTaxes  
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If the client pulls passive aggressive then you can tell them to take a hike or sign a statement that if they receive an IRS notice on this, they will just pay it or mention your fee to review it and tell them to pay it.
Cathy
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