I thought I filed my 2019 business taxes on time. This week I got a belated surprise from 2020 …
It's plainly obvious that 2020 was a tough year.
Things got rough in most of the US around February / March. Social distancing and gathering restrictions happened very quickly and many normal business and government activities slowed, sometimes to a crawl.
It started around tax time
In Virginia, our governor instituted his first executive order dealing with COVID-19 on March 23rd, 2020, which is right in the middle of tax time.
The individual filing deadline was extended to mid-July. Business tax filing deadlines were also extended, but not for us. (The 2019 filing deadline extension applied to tax returns due April 1st through July 15th. Ours was due March 16th. So basically no calendar-year business filers got an extension.)
A few years ago, the due date for partnership returns moved a month earlier, and I missed the change which was in plain sight in the instructions.
We were on top of things. I could feel it.
A few months after missing that change, we received a bill for $1,560 from the IRS. I called them up, realized my error, and the IRS worked was able to forgive the penalties (once!) because of my good tax filing record.
Knowing that I had used my only “do-over” on this matter, I made sure we were getting things ready in time in the years that followed.
March 2020 was no exception. We mailed off the returns for our two LLCs on March 12th, a full four days before the deadline. I sent them certified mail, which provided a tracking number on a little green slip of paper. (More on this later.)
I checked later in the month and saw that they arrived in Kansas City. Good.
The following month, I filed our individual taxes electronically and shortly thereafter got our refund. Very good.
Celebrating too early
Sometime in the fall, I got in a cleaning fit and saw those green slips of paper tacked up somewhere, and shredded them. The late filing notice a few years back had come during the summer, so I was well past that, and in any case I knew that I had filed on time.
Then Thanksgiving, Christmas, and New Year's. (Be gone, 2020!)
Then this past week — the first week of 2021! — my wife comes up with a letter and a concerned look on her face.
“It's a bill from the IRS for my business. You filed the business taxes on time, right?”
Ummm … yes, I had. And they're just getting to us now?! Is this a scam or something? I was thinking.
I looked up the number on the Web and it was legitimate. So I called up.
After getting booted out twice for high call volume, and staying on hold for nearly an hour on the third call, I got through.
The IRS was, and still is, in a giant backlog
The employee was very pleasant and very helpful. (I've found this to be the case every time I've called. No joke!)
She looked up the account for the LLC, and it was indeed marked as being filed late. I told her that I mailed out the return on March 12th.
“Do you have proof of this?” she asked.
My proof was that little green slip of paper that I threw out months ago. Well … dang. The payment receipt with the tracking number wasn't enough. I needed the postage receipt.
She then looked up to see if she could do the one-time forgiveness thing, but I had said that I already used it, and she agreed with me.
She eventually managed to find another way to forgive the penalty, for which I was very glad. Since we have two businesses (more on that below) I asked about the other one, just to see if I could get ahead of the paperwork and because it would likely have the same issue.
This was when I learned when the IRS actually processed my business returns.
The one I got the letter for was processed in Week 45, or beginning of November. Nearly the end of the calendar year.
The other one? It hadn't even been processed yet. She made a note in the account for that one referring to the first, and advised me to call back in 60 days if I hadn't heard anything. It might end up not being just a late filing, but a failure to file. (Again, back in March 2020 I thought I had filed all of this on time!)
In other words, the IRS has a giant backlog and they're still likely working through tax year 2019. And tax year 2020 is upon us! Oh boy.
Welcome to COVID. I don't blame anyone; it's just the way it is.
What I learned about tax filing through this
Here's what I learned through this.
Keep records of filing date
I assumed that the timely postmarking of my taxes and their arrival was good enough. It wasn't.
Should they have noted the postmark and put it in the “filed-on-time” pile? Yeah, but they didn't. (I don't even know if that's how it works. Things always seem easy if you're not the one doing it, right?)
So now it was up to me to prove that I did indeed file on time, and I threw away the documentation.
At one point I was utterly terrified about throwing anything away because of things like this. This was the first time in years that I actually threw away the wrong piece of paper.
Not again. It's a tiny piece of paper. I could have easily saved it.
Better yet, file electronically
Part of the reason for the (very) delayed follow-up was because I paper filed. I should look for a way to file electronically.
Nothing to get lost or delayed in the mail, and it's processed instantly.
Looking for an easier tax year 2020 filing
After working through this hiccup, and seeing what the IRS is still up against from tax year 2019, it wouldn't surprise me if things still take more time than they normally do.
But it is good to see that there are professionals everywhere and that they're persevering through this along with everyone else.
