With the significant amount of unhabitual aid that came about as a result of the pandemic, accountants have had a particularly challenging couple of years. This is particularly true when it comes to ensuring everything is accounted for when preparing clients’ taxes.
The IRS has also had a bit of trouble managing the challenges of the pandemic. They have faced staffing shortages as well as declining funding. Because of this, taxpayers and accountants are seeing issues throughout the tax season. One of the more pressing matters is the lack of clear communication from the IRS regarding two items. These include the third economic impact payment (EIP3), and advance child tax credit payments. The good news is that IRS transcripts can provide you more information about both of these.
Advance Child Tax Credit
In December, the IRS sent out Letter 6419 to taxpayers with the total amount of advance child tax credit payments. However, there have been numerous reports about the information in some of these letters being incorrect.
Mike Cohn at Accounting Today has written a nice in-depth piece about this issue. In response to the widespread worry among top accounting organizations about the impact that these errors might cause, the IRS has directed taxpayers to a new website. This site can help you verify the correct amount that you need to report on your tax return.
Without proper communication from the IRS, it remains unknown how many recipients of these payments will notice if there is an error. If there has been an error, it is important to take the necessary steps to confirm the correct information. This is why it can be very helpful to pull IRS transcripts.
In addition to the lack of communication about this new procedure and potential errors in the letter, accountants and taxpayers are up against difficulties accessing the website. The IRS has implemented a new verification process. This process includes taking a selfie and submitting a photo of their driver’s license or passport to third-party service, ID.me. Pulling individual IRS transcripts can provide one with more information regarding this.
Third Economic Impact Payment (EIP3)
The IRS has also noted that some people accidentally received more than one EIP3 payment. At the same time, some payments didn’t get through to the recipients. One can find information about payments on individuals’ IRS accounts.
Depending on if you didn’t get an Economic Impact Payment or got less than the full amount, taxpayers may be eligible to claim a Recovery Rebate Credit on their 2020 or 2021 federal tax return. The first two payments should be applied to 2020 tax returns and the third is linked to 2021.
Also, remember that Economic Impact Payments applied to different tax years. It is a good idea to look here for any inconsistencies as well. It is also important to note that you will not have to pay back the stimulus checks.
Using IRS Transcripts to get a Correct and Holistic View
Pulling client’s IRS transcripts is a really effective way to view and verify activity on their tax accounts. This includes information regarding EIP3 and advance child tax credit payments.
There are a number of different ways to pull these transcripts, including going directly through the IRS. During tax season, the IRS can be challenging to get a hold of if you run into problems setting up your account or pulling transcripts. That’s where third-party transcript software like Transcripts & Notices can help securely and easily access them.
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