This tax season more than any other, practitioners are faced with constantly changing circumstances due to a variety of legislation at both the federal and state level. Similarly, guidance for how to deal with these changes are scarce and often released without warning on the IRS or FTB websites.

CSEA is committed to keeping our Members and all tax professionals informed during this challenging situation. If you are tired of chasing the information that you really need, then you've come to the right place. This page serves as your one stop shop for important resources, including IRS News Releases, helpful tax tips, and directives related to COVID relief legislation.

Check back frequently as new information will be added as it becomes available.
 

Federal Information

IRS Guidance - 2020 tax return overpayments that are applied to the 2021 tax year - April 12, 2021

The following information is from the IRS website. This guidance details the treatment of 2020 tax return overpayments that are applied to the 2021 tax year:

The IRS postponed to May 17, 2021, the date to file 2020 Forms 1040 and 1040-SR and to pay any related tax. The due dates for estimated tax payments for 2021 were not postponed. The first 2021 estimated tax installment is due April 15, 2021. If an individual taxpayer has a 2020 overpayment and elects to credit the 2020 overpayment against the 2021 estimated tax, the date on which the 2020 overpayment is applied against the 2021 estimated tax depends on: (a) the date(s) of payment, and (b) the extent to which an overpayment exists as of April 15, 2021. An extension of time to file has no effect on either the date of payment or the date on which an overpayment exists.

To the extent an overpayment of the 2020 tax exists as of April 15, 2021 (because payments made on or before April 15, 2021, exceed the 2020 tax liability), and the taxpayer makes a valid election to apply the overpayment to 2021 estimated tax, the overpayment would be applied as of April 15, 2021, whether the 2020 return is filed on April 15, May 17, or October 15, 2021.

To the extent an overpayment of the 2020 tax is attributable to a payment made after April 15, 2021 (including any payment made after April 15, 2021, but on or before May 17, 2021), that overpayment would not be available for crediting as of April 15, 2021, and would be applied as of the payment received date, not as of April 15, 2021.

Further examples are available on the IRS website here.

Tax Insight - What is the Effect of Community Property on the New Unemployment Compensation Exclusion? - April 9, 2021

On March 11, 2021, the President signed into law the American Rescue Plan Act of 2021, H.R. 1319, P.L. 117-2. Section 9042 of this law added a new section of the Internal Revenue Code (section 85(c)) providing an exclusion from gross income for unemployment compensation.

Under this new Code section, a taxpayer whose gross income is less than $150,000 (without the unemployment compensation income) may exclude up to $10,200 of unemployment compensation income for 2020.

The new Code section limits the exclusion to the spouse who "received" the unemployment compensation income.

Controversy has arisen as to how IRC §85(c) applies in a community property state. If one spouse received the unemployment compensation income but the other spouse had a one-half interest in that income, are both spouses entitled to the exclusion? If adjusted gross income on a joint return is $150,000 or more, should the spouses file separate returns in order to get below the $150,000 threshold?

Read the full article here

IR-2021-71, March 31, 2021

IRS announced on March 31 that it will automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan. The first refunds are expected to be made in May and will continue into the summer.

The new legislation allows taxpayers who earned less than $150,000 in modified adjusted gross income (AGI) to exclude 2020 unemployment compensation up to $20,400 if married filing jointly and $10,200 for all other eligible taxpayers.

For those taxpayers who already have filed and figured their tax based on the full amount of unemployment compensation, IRS will determine the correct taxable amount of unemployment compensation and tax. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.

IRS will do these recalculations in two phases, starting with those taxpayers eligible for the up to $10,200 exclusion. IRS will then adjust returns for those married filing jointly taxpayers who are eligible for the up to $20,400 exclusion and others with more complex returns.

There is no need for taxpayers to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return.

For example, IRS can adjust returns for those taxpayers who claimed the Earned Income Tax Credit (EITC) and, because the exclusion changed the income level, may now be eligible for an increase in the EITC amount which may result in a larger refund. However, taxpayers would have to file an amended return if they did not originally claim the EITC or other credits but now are eligible because the exclusion changed their income.

The new IRS guidance also includes details for those eligible taxpayers who have not yet filed. More information for those taxpayers who have not filed already is available here.

Read the full news release here.

IR-2021-67, March 29, 2021

IRS announced that individuals have until May 17 to make contributions to IRAs and health savings accounts. Foreign trusts and estates that file Form 1040-NR also have until May 17 to file and pay.

This follows a previous announcement extending the 2020 federal individual income tax filing due date to May 17.

Read the full news release here.

IR-2021-67, March 29, 2021

IRS announced that individuals have until May 17 to make contributions to IRAs and health savings accounts. Foreign trusts and estates that file Form 1040-NR also have until May 17 to file and pay.

This follows a previous announcement extending the 2020 federal individual income tax filing due date to May 17.

Read the full news release here.

Notice 2021-21

This notice explains that no extension is provided for the payment or deposit of any other type of federal tax including estimated income tax payments, or for the filing of any federal return other than the Form 1040 series and the Form 5498 series for the 2020 tax year.

Read the full notice here.

State Information

(Updated) FTB FAQ - 2020 tax year extension to file and pay (Individual) - April 11, 2021

The following information is from the FTB’s FAQ webpage regarding individual returns. Additional information can be found here.

General

The IRS announced it is extending the 2020 tax year federal tax filing due date for individuals only from April 15, 2021, to May 17, 2021. Will California also postpone the 2020 tax year due date for individual California taxpayers?

Yes, California has postponed the income tax filing due date for individuals (those who file forms 540, 540 2EZ, and 540NR, including PIT composite returns) for the 2020 tax year from April 15, 2021, to May 17, 2021.  Individual taxpayers who pay their 2020 taxes in full by May 17, 2021, will not be subject to penalties and interest. This relief is available to all individual California taxpayers without filing a request or contacting FTB.

Will individual taxpayers be subject to penalties and interest if they do not pay their 2020 taxes in full by the postponed due date of May 17, 2021?

Yes, any amount not paid by the postponed due date will be subject to applicable penalties and interest as of May 17, 2021.

California postponed the 2020 tax year filing and payment deadline for individual taxpayers to May 17, 2021. Will California also postpone the time for an individual taxpayer to file a claim for refund to May 17, 2021, it that period expires on April 15, 2021?

Yes, if the statute of limitations to file a timely claim for refund normally expires on April 15, 2021, the FTB will consider the claim timely if the individual taxpayer files the claim on or before May 17, 2021. For purposes of claiming a refund within one year of an overpayment, the look-back period will consider payments made within one year of the actual expiration of the statute of limitations, but if that date expires on April 15, 2021, the FTB will consider the claim for refund timely if the individual taxpayer files the claim on or before May 17, 2021.

Is the due date for an SMLLC that is owned by an individual to file a Form 568 and report the fee and annual tax also postponed to May 17, 2021?

No. Although the individual's due date is postponed to May 17, 2021, an SMLLC that is owned by an individual still has an original due date of April 15, 2021, to file a Form 568 to report the fee and annual tax. Because of unique facts related to SMLLC filers, if an individual member receives a notice of a late payment penalty associated with the SMLLC, the affected taxpayer should contact FTB and FTB will abate the penalty.

Estimated Payments

Is my 1st quarter estimate payment for the 2021 tax year still due on April 15, 2021?

Yes, similar to the IRS, the due date for an individual taxpayer's 1st quarter estimate tax payment for the 2021 tax year is not postponed and is still due on or before April 15, 2021.

EDD Update on Accessing Extended Federal Benefits – April 6, 2021

All claimants who have exhausted their Pandemic Emergency Unemployment Compensation (PEUC) benefits and have been waiting for additional weeks will be able to certify for benefits starting on Sunday.

The increase in federal benefits under the American Rescue Plan comes at a time when many Californians are also reaching the expiration of their initial claims for benefits. At the end of that benefit year, most claimants will need to reapply for benefits:

Those on a Pandemic Unemployment assistance (PUA) claim do not need to apply for a new claim when they reach the end of their benefit year.

Everyone else, including those with a regular state UI claim, a PEUC extension, or a Federal-State Extended Duration (FED-ED), must reapply for federal benefits if they are still unemployed once they reach the end of their benefit year.

Individuals will be notified via email, text, or mailed notice when the new claim is processed, which may take up to three weeks. Get details here.

March 1, 2021: EDD and IRS issued guidance for taxpayers with a missing or incorrect Form 1099-G.

Due to the pandemic, millions of Americans lost jobs in 2020 and received unemployment benefits issued by state agencies. Scammers took advantage of the pandemic by filing fraudulent claims for unemployment compensation using stolen personal information.

Taxpayers who receive an incorrect Form 1099-G for unemployment benefits they did not receive should contact the issuing state agency (EDD in California) to request a revised Form 1099-G showing they did not receive these benefits. Taxpayers who are unable to obtain a timely, corrected form should still file an accurate tax return, reporting only the income they received.

EDD recently shared a number of new resources designed to help people who received a Form 1099-G prepare their 2020 tax returns:

Those who received Form 1099-G and think that someone fraudulently filed a claim using their name, address, or Social Security number are encouraged to notify the EDD through Ask EDD by selecting the Form 1099G category.

Those who did receive benefits but did not receive a 1099-G should visit the new Form 1099-G information center to request a copy.

A designated helpline is also available during regular business hours at 866-401-2849 for those who do not agree with the information on their Form 1099-G or believe they have been victim of fraud. Once fraud has been verified, EDD will issue a corrected Form 1099-G.

Other resources include answers to FAQs and a video about how to access tax information using UI Online.

Read the full IRS tax tip here.