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How About the Late Changes That Are Very Possibly Forthcoming When Congress Increases Stimulus Payments to $2K?

Ephesians3-14
Level 7

Picture this very realistic scenario coming down the pike this tax season...Chucky and Nancy approve (and Joe signs) the $2K stimulus payments in early Feb 2021. These payments would be considered 2020 tax credits (just like the one dished out in late Dec 2020 and paid in January) even while the 2020 tax returns are in the process of being prepared. Yikes. Talk about throwing a wrench into the tax prep season. If these "new" stimulus payments are made after filing dozens of client's 2020 tax returns in late Jan or early February, all of those returns would need to be amended. 

Hope it doesn't happen -- or, that it is at least let it be considered a 2021 credit and not a 2020 credit. 

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5 Replies 5
qbteachmt
Level 15

"are made after filing dozens of client's 2020 tax returns in late Jan or early February, all of those returns would need to be amended."

Which can be done along with 1040X amendments required once the Corrected 2020 W2 is issued after the 2021 collection of the deferred Social Security amounts:

https://www.irs.gov/forms-pubs/form-w-2-reporting-of-employee-social-security-tax-deferred-under-not...

If the employer succeeds is collecting what is owed, of course.

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sjrcpa
Level 15

1. This is  good reason to wait to file those returns.

2. I suspect the IRS computers will have records of the EIP2 payments and adjust returns as needed.

3. All payments are to be made by January 15, 2021.


ex-AllStar
rbynaker
Level 11

@qbteachmt wrote:

Which can be done along with 1040X amendments required once the Corrected 2020 W2 is issued after the 2021 collection of the deferred Social Security amounts:

https://www.irs.gov/forms-pubs/form-w-2-reporting-of-employee-social-security-tax-deferred-under-not...

If the employer succeeds is collecting what is owed, of course.


M,

Thanks for the reminder, I'd forgotten about this fiasco.  Didn't the new law stretch this out through 12/31/21?  So then next January every FedGov employee is going to get a 2020 W-2c?

Ugh.  I've been tinkering with my organizer template this week, I may need to go back and add a question for this.  If I'm lucky 5-10% of my clients might be savvy enough to understand it and answer correctly.

Rick

qbteachmt
Level 15

"Didn't the new law stretch this out through 12/31/21?"

Wow, I hadn't even started to research that one!

From: https://www.whio.com/news/local/double-social-security-payroll-tax-be-taken-out-some-2021-begins/BYC...

"The Consolidated Appropriations Act, 2021 was passed and extended the period for collecting deferred 2020 Social Security taxes. The period for collection is now January 1, 2021 through December 31, 2021 (instead of January 1, 2021 to April 30, 2021), according to federal officials. This change was announced Monday afternoon."

I see the military and governmental payroll services have announced their exact paycheck withholding dates.

I'm still trying to understand the ramification of that deferral against the likelihood that the amounts deferred will be forgiven for the Sched SE filer.

Formula and other Q&A: https://www.irs.gov/newsroom/deferral-of-employment-tax-deposits-and-payments-through-december-31-20...

"24. How can a self-employed individual determine 50 percent of the Social Security portion of self-employment tax attributable to net earnings from self-employment earned during March 27, 2020 through December 31, 2020? (added July 30, 2020)

Self-employed individuals may use any reasonable method to allocate 50 percent of the Social Security portion of self-employment tax attributable to net earnings from self-employment earned during March 27, 2020, through December 31, 2020. For example, an individual may allocate 22.5% of the individual's annual earnings from self-employment to the period from January 1, 2020, through March 26, 2020, and 77.5% of the individual's annual earnings to the period from March 27, 2020, through December 31, 2020. Similarly, an individual may use any reasonable method in applying the Social Security wage base or taking into account partnership income in determining the portion of 50 percent of the Social Security portion of self-employment tax attributable to net earnings from self-employment for the period from March 27, 2020, through December 31, 2020."

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BobKamman
Level 13

I'm uncomfortable with how narrow the gap is between referring to a Senate leader as "Chucky," and breaking into the Capitol bulding in order to smoke pot while seated at his desk.  However, the First Amendment protects minorities, like the 40% who still exert some control over national politics.  It should be pointed out, though, that the House voted 275-134 to raise EIP #2 to $2,000 and you need more support than just the members of the Speaker's party, to do that.  The Senate would have voted to pass it also, and the President would have signed it, had one Senate leader not stood in the way -- and that was not the one from New York.    

"All of those returns would need to be amended."  Why?  I don't remember any 2019 returns being amended before the EIP #1 payments could be made.