The Taxing 2020 Tax Season

Kelly Phillips Erb, the managing shareholder of Erb Law Firm PC and a Forbes senior contributor known as @taxgirl on Twitter, talks to Tax Notes reporter Jonathan Curry about the abnormal 2020 tax season.

This post has been edited for clarity and length.

Jonathan Curry: Kelly, thank you so much for joining us today. It’s a real pleasure to have you on the podcast.

Kelly Phillips Erb: Thank you for having me.

Jonathan Curry: How does this filing season compare to previous years? 

Kelly Phillips Erb: It’s unlike anything I’ve ever seen before. There’s always little glitches and something happening in some part of the country. It’s really unusual for everything to be happening at the same time. It’s definitely out of the ordinary.

Jonathan Curry: When did you first realize that this filing season was going to be different than past ones?

Kelly Phillips Erb: I think we all knew early in March. I’m in the Northeast. I’ll go ahead and put that out there because I think that our experience may be a little different timing-wise compared to other parts of the country. In the Northeast, I think people started to get nervous about COVID-19, and I heard more and more folks say around spring break that maybe they weren’t going to come back to their offices, which is unusual in and of itself.

Then there started to be more conversations on social media about the economy slowing down. Even before we heard Treasury or the IRS make announcements, we were already hearing from clients and taxpayers that things were a little out of the ordinary. Some of the Volunteer Income Tax Assistance (VITA) sites were closing down, and because it was not a coordinated closure in the beginning, it was by area. I was beginning to get a lot of emails.

I knew that things were really, really going to be different after the Coronavirus Aid, Relief, and Economic Security Act was passed. We heard about the stimulus checks, but before the IRS had actually offered any guidance on those checks, I started getting emails. I get a lot of emails from readers, but the sheer volume of emails really shocked me. Within a couple of weeks, I had over 2,000 emails regarding stimulus checks. 

Then, all of a sudden, the Paycheck Protection Program questions started coming in. It was different all across the country and it was different sectors. I think that was why it was really striking. Normally, when we hear about the economy or taxpayers, it’s about very specific folks. It might be just self-employed persons or one sector of the economy. My colleagues and I started noticing that we were getting these questions from everyone, from wealthy taxpayers to the folks who were not tax filers. The numbers were just really eye opening.

Jonathan Curry: You mentioned some of the practical challenges with offices being closed. What are some of the unique, practical challenges that you saw yourself this year? I know the IRS has been a little bit hard to get in contact with. As clients and you have questions for the IRS, was the IRS always able to answer?

Kelly Phillips Erb: It’s funny because I think people think about it in terms of you just couldn’t call them. But there were a lot of other kinds of ways that it impacted tax professionals.

A perfect example is the fact that they took the Centralized Authorization File (CAF) units, where they process powers of attorney, offline because nobody was there to staff them. E-services remained open. On the surface, you could still pull a transcript for a taxpayer that might need it. But, if you had a new client or a taxpayer who had a new year, you couldn’t actually transmit that to the IRS.

You also had taxpayers who were normally not filers. Folks who might just be receiving Social Security or Social Security Disability Insurance (SSDI) were all of a sudden rushing to file returns for the stimulus checks before that was sorted out. Again, VITA and Tax Counseling for the Elderly (TCE) sites were closed. A lot of tax professionals were getting calls from folks looking to file, but these people weren’t used to paying a professional to do the returns.

You had this weird in-between of your phones are ringing from new clients at the same time that you can’t ask the IRS questions. We couldn’t get through to the Practitioner Priority Service, which is the practitioner line. You couldn’t get through to make sure that the powers of attorney were online. Taxpayers were still getting liens and levy notices, even though those were supposed to have stopped. They didn’t stop initially.

Taxpayers were panicking. If you get a notice that says they’re about to seize your bank account and you call someone and they say, “I’m sorry, I can’t ask the IRS to stop it,” that causes a sense of panic. It was a little chaotic, especially in the beginning. I think once we got used to it, people started adapting and advising clients differently.

Then, the IRS became much more vocal about what was happening and issuing notices. I think they were slow to roll out some of that guidance. I know that was a criticism early on, but now they’ve been pretty good about keeping you apprised of what’s going on. Initially, it was a lot of folks who didn’t know what was happening and tax professionals who weren’t able to tell those folks what was happening.

Jonathan Curry: Do you think things have settled down by now?

Kelly Phillips Erb: It depends. There’s a lot of deadlines coinciding and there’s still some confusion, like about estimated payments. I know the IRS just issued guidance recently saying, for example, that you only have to write one check for two payments. I think that things are settling.

Statistically, most folks have already filed, which is good news for preparers. But I still think there’s a lot of questions about how folks are arranging their tax planning and whether they’re going to be able to pay taxes that are coming due either in June or folks who are on extension in October.

I know that tax preparers are planning on filing a lot of extensions. That’s pretty traditional. About 10 percent of taxpayers file extensions every year. I think that the timing means that those are going to be pushed a little more because we just heard that the date was not going to be extended again.

I think a lot of tax preparers held off on filing an extension this year because they thought if they were going to go ahead and extend through October, there was no need to extend. Now they’re racing to file those extensions. So again, I think that there’s just a lot of stuff happening at the same time.

Jonathan Curry: There’s been a lot of coronavirus-related relief from the IRS and new tax provisions associated with that. How do you keep track of all the changes?

Kelly Phillips Erb: It’s really hard. I read a lot of press releases. I follow the IRS on social media, and I’m always checking with their media department. But there are so many changes. One of the criticisms I’m sure you’ve heard is that there appears to not have been as much advanced coordination. I understand that it seems like an unfair criticism because nobody knew to plan for this. But there’s a lot of contradicting information that has come out of Treasury and the IRS.

For example, Treasury Secretary Steven Mnuchin actually extended the filing season by tweet. He put it on Twitter before the IRS had confirmed it. Folks kept saying, “Well, it’s not official until IRS says so,” even though the IRS is part of Treasury. It was confusing because of the way that information rolled out.

Normally, if people were at their offices, the media department would be responding differently. But because folks were at home, the information was rolling out very slowly.

In the beginning, it was much harder to know and to sort out what was going on. I think it’s a little better now. One of the challenges, quite frankly, is that states are not coordinating with the federal government in terms of due dates. I know that there was at least one state — I can’t recall off the top of my head — that only extended through June, not through July. If you had to file a return in two states, which is not uncommon these days, there were issues about whether those returns were going to be filed timely. It’s hard to know where to go and what to do. 

I think a lot of the folks in our profession regard social media a little skeptically. They think it’s only teenagers tweeting about Chris Evans. But I do think that there’s a lot of really good information out there. Even the IRS Criminal Investigation division is now on social media. That’s a relatively new development.

One of the best ways to keep up with what’s happening has been to follow Treasury and the IRS on social media, as well as people who know what they’re talking about. The folks that you rely on to give you good information are the people that you should continue to follow, not just chase whatever is most popular or being retweeted a bunch of times.

Jonathan Curry: I wrote an article back in mid-April about how the filing season was going at the time. Quite a few people told me that what was really keeping them busy was PPP loan applications. They were not working on tax returns.

It’s been more than two months since then. What’s been your experience being plugged into the tax community? What have you seen people doing, if they’re not doing tax returns?

Kelly Phillips Erb: It definitely has been keeping folks busy, but I also think it’s exhausting them. In a traditional season, you would be done in April and then most tax folks that I know take some time off. Then you gear up for the second wave, which is working on your extensions.

That didn’t happen, of course, this year. I do think that around March and April, people were still working on returns. Then, when it became apparent that the date was going to be pushed off, they didn’t need to make those a priority anymore. But you did have those PPP loans and those Economic Injury Disaster Loans (EIDL) that folks had questions about. Tax professionals became busy again just working on those and helping taxpayers process them.

When those were over, now you have the forgiveness applications and July 15. There wasn’t any break. You’re going to keep dragging into extension season. 

A lot of the folks who needed the money the most were the folks who didn’t have their records in the best condition. My colleagues were joking that we’re all payroll tax experts now. You had people who had been filing their own payroll tax returns, maybe not using a company. Now they were throwing them on the desk and saying, “How do I make sense of this?” Or “I don’t know how I was supposed to pay myself as an S corporation. I don’t think I did it right. What does that mean now?”

It’s really easy to say “I did a PPP application. It was a couple of hours’ work.” I think that’s a misnomer because there’s a lot of backstory that accompanies that. People did not show up in offices with pristine records and say, “Here, I just need to fill out this application.” I think tax preparers and tax professionals were tasked with cleaning up a lot of records and kind of reconstructing a lot of records. It was a lot of work.

Jonathan Curry: The PPP loan was initially just an eight-week program. Now it’s been extended a little bit further. I know back in March and April, that was taking up a lot of tax professionals’ time. Is it still dominating a lot of their workloads right now? Or do you think it’s kind of settled a little bit?

Kelly Phillips Erb: I think it still is dominating workloads. I think that’s because the guidance has changed. There’s been a lot of things that have either changed the nature or changed the timing that have kept tax professionals really busy. Again, I don’t think it was a straightforward, “Let me fill out something and I’m done.”

We are still trying to understand guidance. There’s still entire Twitter threads dedicated to what is an full-time employee. I think there are a lot of gray areas that folks are still trying to sort out. 

Jonathan Curry: It looks like the IRS and Treasury are sticking with the July 15 filing deadline for individuals. Are you pro-IRS on this decision?

Kelly Phillips Erb: This is crazy unpopular to say, but I am. I do have a caveat. I think that it would have been better for tax preparers and taxpayers to know that the deadline was not going to be moved earlier. 

Do I think the deadline should have been moved? No. Again, if we had known earlier, you could start preparing those extensions a lot earlier. That’s one of the flaws in the timing of the announcement.

But if you push it out again to October, the season never ends for tax preparers, which I think is really hard on the profession. But I think also it’s going to make things more difficult for the IRS because the next tax season is actually not that far away. 

I think the announcement was the right thing to do. I think the timing was off. I think it should have been made earlier.

That being said, I would like to see some opportunity for automatic penalty abatement for folks who don’t pay until October. I think that the dragging of the feet on the announcement led some people to believe that they wouldn’t have to pay until October. Even though that’s not true, I think people believed that.

I think with all of the payments now coming due in July, some folks aren’t going to have the money. That’s going to create a problem for tax preparers who are going to have to do abatements. 

Jonathan Curry: I did see a tweet recently from an accountant who was commiserating with quite a few others over the issue of filing season burnout. Did you ever have a burnout moment yourself? If so, how did you de-stress in these kind of unprecedented times?

Kelly Phillips Erb: Oh yeah. I’m surprised that more tax professionals really aren’t being burnt out. I will say that it’s not just the sheer load of work. I think that there’s a little bit of projection that’s happening with tax professionals. That’s really painful and stressful.

When we work with our clients, we’re not doing a five-minute data entry. These are folks we’ve known for years. These are people that we understand their businesses. We see them yearly. Now these are the folks who are calling and telling us that they’re going to have to close down their business. They’re going to have to fire their best employees.

There’s a lot of economic hurt in the country right now. Tax professionals have become listeners because we’re the ones who see the numbers. We’re sometimes the ones who have to deliver the bad news. I think it’s been really hard.

I can tell you personally, when I was checking out the emails earlier, I ended up getting over 7,000 emails over the course of this, especially the stimulus check run. Many of them were just stories that were hard to read about people who only had $30 left in the bank because they had been laid off. Seniors who relied on charities to bring them food and other things normally, and they weren’t getting that because of the shutdown. There was just a lot.

I think that tax professionals, in addition to doing all the work, have heard these stories constantly for months. Congress hears them occasionally in those hearings. I don’t think they understand what it’s like to hear that every week.

When you talk about stress and you talk about overload, it’s not just the hours. It’s the personal nature of the job. It’s really hard to explain when someone calls and tells you that they have a problem, you want to fix it. Part of my job is as a tax attorney is I’m a fixer. When someone calls and tells me something that I can’t fix, it’s really hard. There have been nights when I’ve told my husband, “I need to sit here right now and I need the kids to not be here for a minute because I have to think.” 

There has been an inordinate amount of stress. Again, not just related to workload, but the substance of what we’ve been facing all through the economic downturn. We’ve really seen it and felt it in our profession a lot more than maybe other folks have. I think that is contributing to some serious burnout.

I do think that this is something that we’re not taking a moment for ourselves because we’ve just been kind of dedicating ourselves to our clients.

That’s not a good thing. I’m hopeful that this July 15 deadline will signal to folks that there’s a little bit of a break coming and maybe we’ll all take time to take care of ourselves.

I’m usually a really optimistic person, which is why I think this is particularly hard to say, because it’s been hard to live. I hate to sound down. I think we all love what we do. I don’t want it to sound like I’m complaining. I think it’s hard.

Jonathan Curry: I’ve been seeing lots of people all over Twitter sharing their experience. It’s been hard to see. Kelly, thank you so much for taking time to talk with us today.

Kelly Phillips Erb: Thank you for having me. I appreciate it.