Changes To Expect In 2021 And From The IRS
2020 has been a rollercoaster of change from every aspect, especially financial. However, as the year comes to an end, taxpayers and citizens are wondering what the New Year has in store. Perhaps, by paying attention to the current financial and tax situations, it would be easier to cope with the changes that are likely to come into effect in 2021.
At John P. Jones Inc, we have been keeping a close eye on the efforts of tax authorities and their decisions. Based on our observations, we’ve predicted three changes. Keep reading to see what they are and how you should react to them.
1. The IRS will get back on track
In August 2020, the IRS quit mailing “balance due notices” because it could not keep up with the mail volume. The COVID-19 crisis caused a significant cutback in its workforce, which created a growing heap of work for the government body. For instance, my client received a notice in July, dated in March, telling her to pay a bill in April. Additionally, taxpayers had mailed in checks to pay their bills that remained in unopened envelopes while the IRS’ computers mailed out follow up letters to those taxpayers. The Service is still not issuing new liens and levies as the IRS collection system is slowly coming back. But I don’t think it will be fully restored until the beginning of next year. If taxpayers act now and settle with the IRS, they can often resolve their cases and enter agreements before the IRS begins publicly filing liens.
2. Cryptocurrency spending will be scrutinized
In 2021, the IRS will step up its enforcement efforts with virtual currency and cryptocurrency. In 2018, Coinbase exchange notified 13,000 customers it had reached an agreement and handed their information to the IRS. The IRS then sent letters to those Coinbase customers and was conducting audits in 2019 and 2020 when the COVID-19 crisis hit.
Taxpayers who had cryptocurrency transactions in the last few years and have not reported them should consider amending their returns for those years. This is because it is more likely that there will be more scrutiny in cryptocurrency spending in 2021.
3. Unemployment may increase
Looking at the current state of the economy, unemployment is expected to increase along with wave after wave of business closings. This will lead to a considerable rise in financial distress and bankruptcies. People facing these issues often become delinquent in dealing with their tax obligations.
Taxpayers should not fall behind on filing their tax returns as much as possible. This is because penalties for late filings are much larger than penalties for late payment. If one can not pay their taxes, they can often settle with the IRS for less than what they owe.
For more predictions about the future of taxes, reach out to John P. Jones Inc today! I am a certified public accountant in Chicago, IL, and I have over thirty years of experience. I have extensive knowledge of accounting principles and can easily minimize tax liabilities for individuals and small businesses. My team and I prioritize customer service and satisfaction by putting their requirements before our own.