The Latest Tax News

“The hardest thing in the world to understand is the income tax.” ~Albert Einstein

2021 Tax News

With the ongoing pandemic and backlogs, the IRS is having some real issues right now (more on that below). To help you avoid having to try to reach someone at the IRS, we have provided some basic information for you.

Click on each link below for more information you can use:



As mentioned, the IRS is having some pretty major issues. This is why, if you have asked for our help, it is taking a while for us to get you answers. Here are some articles documenting some of the current issues:

The IRS is a hot mess: Millions of tax returns haven’t been processed, and calls are going unanswered, including mine

I received a notice from the agency seven months ago. I still can’t reach a human being to resolve the issue.

By Michelle Singletary, Columnist, published in The Washington Post, July 2, 2021|Updated July 2, 2021

I want to apologize to every person I’ve encouraged to be patient with the Internal Revenue Service as it stumbles through the aftereffects of the pandemic. Your righteous indignation is warranted.

The IRS is critically malfunctioning.

I didn’t fully grasp, until a recent report from the national taxpayer advocate, that the IRS has officially given up on answering every taxpayer telephone call for assistance — and that has to be fixed.

The agency is a hot mess. You are right to be mad as hell when you can’t reach somebody to help explain why your filing or refund hasn’t been processed. And, yes, I cussed, because the time to be polite and forgiving for the failures at the IRS is so over.

Right now, millions of taxpayers are waiting for their much-needed refunds and stimulus payments. Millions more are trying to settle issues with past tax returns and unable get a human being on the telephone, while interest costs potentially tick up each day things go unresolved.

I’m one in the millions fighting to be heard. But more on that later.

A historically high number of returns needed manual processing this year, slowing the issuance of refunds, Erin Collins, the national taxpayer advocate, wrote in the report. At the end of this year’s filing season, the IRS faced a backlog of more than 35 million individual and business returns.

In its response, the IRS essentially said things aren’t really that bad.

“The numbers provided by the National Taxpayer Advocate do not reflect the current situation at the IRS,” the agency said in a statement.

The IRS said that the 35 million number includes “15.2 million individual and business tax returns that are already in some stage of the normal processing stream and not part of the backlog.” An additional 17.5 million are individual returns that may or may not result in a refund, the IRS said.

IRS employees have worked hard during unprecedented circumstances brought on by the pandemic. Yet, Covid can’t be blamed for all the delays at the agency, which was having issues with taxpayer customer service long before the pandemic.

As Collins wrote, “Not everyone can afford to be patient.”

During the 2021 filing season, the IRS received 167 million telephone calls — over four times the number during the 2019 filing season, Collins wrote. At one point, the IRS received calls at the rate of about 1,500 per second.

“IRS employees could not keep pace with this massive volume of calls, resulting in the poorest service ever,” she said.

On the 1040 line, the most frequently called toll-free IRS number, only 3 percent of 85 million calls from taxpayers reached a phone assister.

“Our ability to answer phone calls reflects the amount of staffing available,” the IRS said in its defense. “Pending budget proposals would help the agency’s ability to assist more taxpayers, including on the phones.”

On this issue, the IRS is right. It isn’t given enough money to help taxpayers. Congress funded the IRS this year to provide a 60 percent level of service.

Think about that for a second, because that’s all it takes to see the callousness of this choice by Congress.

That level of funding for telephone assisters means that even in a normal year, the IRS would answer 6 out of every 10 calls routed to them, Collins pointed out.

“I don’t think that’s acceptable,” Collins said in an interview. “It should be a lot closer to 100 percent.”

For fiscal 2022, the agency is asking for a total program increase of $915.5 million, including $318 million to increase taxpayer assistance, IRS Commissioner Charles Rettig said in prepared testimony for a Senate Finance Committee hearing on the agency’s budget last month. Even that would fund only a projected level of phone service of 75 percent.

This brings me to my personal tax saga.

My husband and I received a notice from the IRS in November indicating that we owed an additional $11,786 in income taxes for the 2018 tax year. We did not — not even close.

Admittedly, we had overlooked reporting reinvested dividends from an index fund we own. Fair enough. Our mistake.

But in the process of pointing out that error, the IRS claimed other income wasn’t reported, which was incorrect. We hired a tax professional to help us go through the 11-page notice. We faxed and, as a backup, sent our response through the mail. We calculated what we owed and sent the money right away.

We received another notice on June 21. The IRS removed some of the incorrect items, but not all. Now the agency said we owed $7,028.

One glaring mistake repeated in the latest notice involved 529 college-plan funds we used to cover tuition, room and board for our three children. Somebody in some IRS office is clueless about what is and isn’t a qualified education expense under the 529 rules. Can’t they search for the information at irs.gov like the agency repeatedly tells taxpayers to do?

“It is very frustrating to hear everyone talk about enforcement, enforcement, enforcement when the IRS is not picking up the phone to talk with people who need to resolve issues, especially when the issues are created by the IRS itself,” said Nina Olson, executive director of the Center for Taxpayer Rights. Olson served as the independent national taxpayer advocate for 18 years.

“The IRS continually underestimates the need people have to call it,” Olson said. “Every year, it calculates the level of service it is willing to staff and then puts that in the budget request. It no longer even tries to make the case for answering 80 percent of the calls.”

Poor taxpayer service will only further erode trust in the IRS, she said.

“When the level of service gets so poor and correspondence and problems aren’t being addressed, it just gets cyclical,” Olson said. “You call and then you are cut off after you are on hold. Then you write a letter explaining the situation, but no one answers it. And on it goes until sometimes taxpayers just give up and pay a bill that they really don’t owe, just because they are afraid of what might happen to them.”

I’m angry not for just myself but for the many people who are frustrated trying to get help from the IRS. It might take a 15-minute call to resolve my issue — if I could get somebody on the phone. But many attempts end in being routed electronically through a maze of prompts that leave me wanting to smash my phone.

Then I feel a glimmer of hope when a robotic female voice says, “Please hold while your call is transferred.”

Until I hear this: “We are sorry, but due to extremely high call volume in the topic you requested, we are unable to handle your call at this time. Please try again later or on our next business day. Thank you.”

This computerized ending is so hollow, it makes me holler. I’d be thankful if the IRS would just answer the damn phone.


Still waiting for a tax refund? IRS backlog has grown to 35 million returns

By Aimee Picchi, CBSNews, July 8, 2021 / 7:14 AM / MoneyWatch

A growing backlog of unprocessed tax returns now stands at 35 million, creating ongoing refund delays for millions of taxpayers, the National Taxpayer Advocate said in a recent report. That represents an increase in the IRS’ backlog of unprocessed returns from May, when it was holding 31 million returns.

Some taxpayers have recently told CBS MoneyWatch they have been waiting months for their refunds, and have been unable to learn when their tax return might be processed or when they can expect to receive their refund. As the typical refund stands at more than $2,800 per taxpayer, a delay could cause financial hardship, especially for the many households that rely on their refunds to pay bills. 

The backlog at the IRS comes after a “perfect storm” that created “perhaps the most challenging filing season taxpayers, tax professionals and the IRS have ever experienced,” wrote National Taxpayer Advocate Erin M. Collins in the Wednesday report. The pandemic caused the IRS to shut down some of its operations, while it was also given more responsibility from Congress through several new tax initiatives, such as the three rounds of stimulus checks that were distributed by the tax agency. 

“The impact of the pandemic on IRS operations — and therefore on taxpayers — has been significant,” Collins noted. “The IRS’s historically high number of returns requiring manual review means that most individual taxpayers in this group and many business taxpayers will not receive timely refunds.”

Some people may be able to weather the delay, Collins noted, but it could “impose significant financial hardships” on low-income taxpayers and small businesses without much wiggle room, she said. 

The backlog of returns represents a fourfold increase from two years earlier, prior to the pandemic, the report noted. Unfortunately, taxpayers won’t receive their returns until the IRS is able to manually process those 35 million returns that are awaiting review, she added

Why the delays? 

The unprecedented backlog started in March 2020, when the pandemic caused the IRS to shut down its offices for health and safety reasons — during the middle of tax season for 2019 tax returns. Paper tax returns filed for the 2019 tax year were stored in trailers until IRS employees could get to them.

At the start of the tax season in 2021, the IRS was still working through those paper returns from the 2019 tax year. That meant it was already dealing with an existing backlog when it began accepting 2020 tax returns in February. 

At the same time, the IRS is coping with tax changes passed into law by Congress this year. Many of these changes relate to pandemic-relief efforts, such as the Recovery Rebate Credit, which allows people to claim additional stimulus money if they received too little. But if taxpayers filled out this credit incorrectly, their forms are flagged for manual review by IRS staff, which has added to the backlog.

New provisions for the Earned Income Tax Credit and the Child Tax Credit are also causing snags in the system, since the government stimulus package signed into law in December came too late for the IRS to adjust its forms and computer systems. 

The stimulus package’s provisions allow taxpayers to claim the credits based on their 2019 income instead of their 2020 income if that would have been more favorable to them — but such “look backs” require IRS employees to verify 2019 incomes. 

All of those issues, and more, have caused the “unprecedented number of returns requiring manual review, slowing the issuance of refunds,” Collins noted. 

Backlog requires manual processing

Manual processing of 35 million returns in the IRS’ backlog requires an IRS employee to review or check each one before it can move to the next step, Collins noted. 

The backlog includes: 

  • 16.8 million paper tax returns that need to be processed
  • 15.8 million returns that were suspended for further review
  • 2.7 million amended returns that still need to be processed

Of the 15.8 million returns that need further review, more than 10 million were pulled because of an error, which could be as simple as an addition or subtraction mistake. Nevertheless, an IRS employee must manually review each of these returns to check the errors and address them, Collins noted. 

But “large numbers” of returns flagged for errors relate to the tax credit “look back” issue, as well as discrepancies between the Recovery Rebate Credit claimed by the taxpayer and the IRS’ own records. This could happen, for example, if a taxpayer didn’t accurately recall the amount of stimulus money they received and put down the wrong number, Collins said. 

Phone assistance not a “luxury”

With so many returns backed up at the IRS, it may be no surprise that the number of calls to the IRS and visits to its website jumped this year — with the number of calls jumping to four times what the agency received in 2020, Collins said.

At the peak of the filing season this year, the IRS was receiving about 1,500 calls a second, Collins added. 

The IRS couldn’t keep up with the demand, resulting in “historically poor service,” her report stated. 

For instance, the toll-free number for individual income tax services received 85 million calls, but only 3% of callers reached a customer service rep, she noted. Collins also singled out the “Where’s my refund” tool on the IRS website as needing improvement, noting that in many cases the tool doesn’t provide an estimate of when a taxpayer might get their refund or explanation for the holdup.

“From the taxpayer’s perspective, the inability of the IRS to answer calls or provide answers causes frustration and undermines a fundamental taxpayer right — namely, the right to be informed,” Collins said, adding that she urges Congress to increase funding for the IRS to improve its ability to answer and handle calls. 

She added, “In my view, phone assistance is not merely an option or a luxury.”


Nobody knows if beefing up the IRS will really pay off. We should do it anyway.

Better customer service and a robust push to curb billionaires’ and corporations’ tax avoidance are reason enough to expand the tax agency. We don’t need it to turn a big profit.

By Allan Sloan, Columnist, The Washington Post, July 15, 2021

One of the more interesting numbers kicking around in Washington these days involves the Biden administration’s proposal to double the size of the Internal Revenue Service staff over the next decade and to bulk up the IRS’ computer and data-collecting capabilities.

The proposal’s backers claim that it will produce a private-equity-like 400 percent return for taxpayers over its first 10 years — $316 billion of revenue compared with $79 billion of costs.

As you can see from looking at page 16 of this Treasury report, the first two years show losses, but then gains start, and rise rapidly.

For the last year covered by the report, 2031, the projected return is about 540 percent, up from about 470 percent in 2030. Gains would presumably continue rising in future years.

As someone who realizes that Washington is a hotbed of fantasy finance, my initial reaction was to laugh.

My second reaction was to compare the bulk-up-the-IRS idea with examples of Washington numerical nonsense that we’ve seen over the years. These include the right-wing thesis that big tax cuts more than pay for themselves by stimulating economic activity, which they don’t; and the left-wing Modern Monetary Theory, which I call the Magic Money Theory, that federal budget deficits don’t matter because the government can create as many dollars as it needs without any adverse consequences.

My third — and grown-up — reaction was to take a serious look at the proposal, especially since the IRS is in the news a lot these days because it’s been distributing stimulus payments and child tax credits to millions of households, not just collecting taxes

What I saw is that even though the numbers that the Treasury uses to project profits are the result of assumptions built on assumptions, restoring the IRS to something resembling its former state is a good idea. Regardless of whether you buy the 400 percent return story.

Here are some reasons I think this way, based on my experience of writing about companies and some very rich people that have played endless tax games.

I’ve been enraged for years watching the shameless maneuvers of some big-time U.S. corporations (including Amazon, led until recently by Washington Post owner Jeff Bezos) that let them avoid paying taxes to our country, which is the place in which they were founded and that made their success possible. The same holds true for some individual tax-dodging billionaires who have prospered because of the freedoms and protections that our country offers.

So I figure that anything that might shame tax avoiders who squeeze through loopholes and also scare tax evaders (who by definition are breaking the law) would be good for our country. If taxpayers come out way ahead financially, that’s a bonus. It’s not a requirement.

Anyone who pays attention knows that the IRS staff has been shrinking for years, that it’s almost impossible for an average person to get IRS people on the phone to answer questions, and that the IRS back-office is a total mess. All this ought to be fixed, regardless of whether it produces financial gains for taxpayers.

What I hadn’t realized until I delved into the Treasury’s May report was how much IRS audits of big companies — those with more than $20 billion of assets — have fallen in recent years.

In 2010, according to the report, 98 percent of tax returns filed by those companies were audited. By 2018, it had fallen to 49 percent. I assume that the numbers were even smaller for 2019 and 2020.

You’ve got to figure that having more audits of these big companies — and having the companies know that they’ll be audited annually by well-trained IRS staffers — has to increase tax revenue by decreasing gameplaying.

Please note that I’m not demonizing “the rich”— which the Biden administration defines as households with more than $400,000 of annual income — or big business. I’m just trying to apply some common sense to the mess at the IRS.

I asked the Treasury how — if Biden’s proposal is adopted ——we’d ever know if it’s coming close to meeting the projected returns.

The answer, from Treasury senior spokesman John Rizzo: “Americans will be able to see audit rates among top earners increasing, instead of declining as they have for decades. Providing additional review of those who earn income in opaque ways will ensure those at the very top pay the taxes they owe, just like American workers do.”

It’s not clear how much of Biden’s proposal, if any, will go into effect because many Republicans are speaking out against it.

Forgive my cynicism, but I think that Republicans are opposing the IRS fix to play up to big companies and ultrarich people who are tax-averse, just as the Biden administration is playing up to liberals by using the word “evasion” a lot and saying that beefing up the IRS is “progressive” because it will affect only big companies and “the rich.”

I hope that the IRS gets invigorated and that the profit projections turn out to be reasonably accurate.

I also hope that a better-equipped IRS will let average people get something resembling decent customer service.

And finally, I hope that the combination of a better-equipped and better-staffed IRS and fear of public shaming (such as recent ProPublica stories about some billionaires’ tax avoidance) will change the way that big companies and ultrawealthy tax-dodgers behave.

Those changes would be a lot more valuable to our country, financially and socially, than any profits that taxpayers might get from a beefed-up IRS.


‘The worst’: Tax professionals sound off on the 2020 tax filing season

By Jeanne Sahadi, CNN Business, Updated 12:26 PM ET, Wed April 7, 2021

It’s very hard to win a game when the rules keep changing as you’re playing.

That in a nutshell describes what accountants and other tax preparers have been dealing with at the federal and state levels as they try to complete their clients’ 2020 tax returns accurately and on time.

“This has been my worst tax season in 30 years of practice,” said certified public accountant Harlan Levinson of Beverly Hills, California. “So many hurdles have been thrown at us this year.”

Deadline extensions, new retroactive tax breaks, new guidance and then revised guidance on how to incorporate all the changes have been rolling out ever since the American Rescue Plan was signed into law on March 11, which came a month after the tax filing season began and after 66 million returns had already been filed.

And there are many unanswered questions remaining, especially at the state level, where it’s unclear whether any given state will conform to all the federal changes or just some of them and if so, which ones.

“The changes are confusing everyone,” said CPA Michelle Staebell in Rochester, New York, who also said this tax season has been the worst one she’s experienced in her 15 years of practice.

Lynne Fuentes, a CPA in Jericho, New York, put it this way: “Clients look to us for guidance. And sometimes you look at them like a deer in the headlights because you’re getting the information as quickly as they are.”

Staebell said she suspects her clients secretly think she’s not doing a good job when she says she still needs more time to finish their returns. “I tell them, ‘The law changed on March 11.’ It sounds ridiculous.”

Many CPAs are actually turning away potential new clients seeking help because they have their hands full just handling their existing roster amidst all the changes.

“I try to help as many as I can — and this is one of the first years where I’ve been sending people away,” said CPA Brian Borawski of Waterford, Michigan.

And a lot of preparers are sitting on clients’ returns — especially those who received unemployment compensation or got a Paycheck Protection Program loan for their small business — because their states haven’t indicated yet whether they will follow the IRS and exclude the first $10,200 in unemployment income from tax or let small businesses deduct expenses paid for with PPP money.

“I don’t like to do anything twice if I can do it right the first time,” Fuentes said. “I tell my clients if [lawmakers] change their minds, you’re going to have to pay me to do it again and what are you gaining?”

But before the American Rescue Plan went into effect, tens of millions of individuals and small businesses had already filed their returns. And now they and their tax preparers face questions about if and when to file an amended return.

The IRS has said for those who already filed returns before the unemployment benefits exclusion was approved that it would figure out the fix and pay the filer any additional money owed so they don’t have to file an amended return.

Still, tax preparers will have to double-check the math once they hear back from the IRS.

“Do we trust the IRS to fix it correctly?” said enrolled agent David Mellem in Green Bay, Wisconsin.

Preparers will also have to assess whether the incorporation of the unemployment benefits exclusion makes their clients newly eligible for a host of income-based tax breaks, which the IRS will not be calculating.

If they are eligible, “that means taxpayers have to amend their returns. But I can’t do that [for my clients] until the IRS has fixed it for the taxpayer because that’s my starting point. So I’m on hold until the IRS gets theirs done,” Mellem said.

The agency said it won’t start issuing adjusted payments related to the unemployment compensation exclusion until sometime in May and then continuing into the summer.

“It’s a pain to have to explain what the change is and why we’re not going to be able to [amend] their return for a while,” Mellem said. “I don’t like congressional action in the middle of tax season.”


Arizona Tax Credits for 2021

Even though most of the deadlines for the Arizona Tax Credits are April 15, 2022, we recommend making your donations by December 31, 2021 to make your record keeping easier.

Arizona Qualifying Charitable Organization Tax Credit

These non-refundable Arizona Tax Credits will be applied to your total Arizona income tax for 2021 and reduce the tax. If the credits are not fully used, they will carryover to 2022 (5 years total carryforward). 

Contributions to Qualifying Charitable Organizations (QCO) $400/single; $800/married and Qualifying Foster Care Charitable Organizations (QFCO) $500/single; $1,000/married

Click here and scroll down to Lists of Qualifying Charitable and Qualifying Foster Care Charitable organizations.

Your choice or please consider St. Mary’s Food Bank and Free Arts for Abused Children of Arizona.

Credit for Contributions made or Fees Paid to a Public School $200/single; $400/married

Click here and scroll down to the Resources section for a list of schools.

Your choice or please consider Desert Marigold School.

School Tuition Organization (STO) tax credit (original credit) $611/single; $1,221/married
Switcher Individual Income Tax Credit (additional credit) $608/single; $1,214/married

If you contribute the maximum STO amount, you can also contribute to the Switcher credit.

Click here and scroll down for the list of STO schools.

Please don’t hesitate to call or email us with questions or for additional strategies on reducing your tax bill. We’d be glad to set up a planning meeting or assist you in any other way that we can.

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