Don't Mess With Taxes

At least one state, Texas, joins the Internal Revenue Service in making filing accommodations for those affected by software company's malware troubles.

Watch the full classic Roseanne Roseannadana skit at NBC's Saturday Night Live video page.

As the wonderful Gilda Radner character Roseanne Roseannadana used to say, "It's always something."

That's particularly true in the tax world.

Just when we thought we had made it relatively unscathed through the 2019 tax season, which already was crazy since it was the first one in which most of the Tax Cuts and Jobs Act (TCJA) changes took real life effect for taxpayers, something happened.

The good news is that the something wasn't an Internal Revenue Service computer crash, like the one that happened on Tax Day 2018.

And this current something doesn't affect the 155 million (give or take) individual taxpayers who filed on time in April or got extensions to get their 1040 forms in by Oct. 15.

But the something has been a major hassle for the last week for some nonprofits and the tax professionals who handle these annual filings that are due by May 15.

Filing problems just before due date: It all started on May 6 when Wolters Kluwer CCH clients started reporting disruptions in the cloud-based services.

Once the company realized the problem, it preemptively took a number of its other applications offline too "out of an abundance of caution" while it investigated.

All that meant that work on the tax-exempt forms was slowed and eventually stopped in the midst of crunch time as the May 15 deadline neared.

In a cruel twist of tax timing, on May 7, the day after the Wolters Kluwer troubles started, the IRS issued a reminder to tax-exempt organizations noting approaching due date for the filing of Form 990-series information returns.

Malware makes a mess: Wolters Kluwer's eventual and disturbing finding was that its product was infected by malware.

Fortunately, according to a statement on the company's website, there is "no evidence that customer data was taken or that there was a breach of confidentiality of that data. Also, there is no reason to believe that our customers have been infected through our platforms and applications."

Unfortunately, however, many organizations — and their tax pros — are struggling in order not to miss the May 15 deadline.

More time to file: Well, you can stop freaking out. The IRS feels your pain and is taking steps to ease it.

Wolters Kluwer CCH says it has restored service to the vast majority of its customer applications and platforms and things seem to up and running without incident.

The better news is that the Internal Revenue Service is giving those users more time to file.

"The IRS has approved extensions for tax return types 990, 1120 and 1065 filings that were impacted by the May 6 service interruption of Wolters Kluwer CCH software," the company announced on its website.

The new deadline for affected tax-exempt organizations is May 22, a week later than this week's original due date.

Wolters Kluwer CCH says that as long as the filing is done on or before the extension date, it will not be considered late by the IRS. That also means the IRS will waive any related penalties and interest as long as the new deadline is met.

Finally, as noted earlier, the best of all news is that client and customer data appears to be secure and not compromised by the malware.

Official IRS confirmation of more time: The IRS confirmed the Wolters Kluwer announcement with a release of its own on May 14.

The federal tax agency says:

"The IRS has been working closely with CCH to ease the impact on taxpayers caused by their recent software outage.

The IRS encourages these taxpayers with a May 15 deadline to file on time, if possible. Taxpayers who cannot file on time are encouraged to file for an extension.

Taxpayers affected by the CCH outage who do not file an extension and file after the deadline should include the phrase “Late filed return due to CCH Software Outage” as a statement of reasonable cause.

Potential tax returns affected by this include Forms 990, 1120, 1120S and 1065 for some calendar year and fiscal year filers."

Specifics post-May 15 instructions for the software-affected late filings can be found in the IRS statement.

Timely, penalty-free filing: The company reportedly is reaching out to its customers, but based on some social media reports, not everyone has gotten the word.

If you use Wolters Kluwer CCH products and now are looking at the new May 22 deadline, let me refer you to my fellow Austin resident, Twitter tax pal and CPA Brian Streig.

As an affected client, Brian is staying on top of the software issue and new filing deadline.

He's also promised to keep others in the same tax boat apprised, noting in his blog post today:

"The [May 10] notice [to clients] also said additional information will be provided today [May 13] and will include instructions from the IRS on how to indicate that a return filed after May 15, 2019 but before May 22, 2019 was filed late due to the CCH service interruption.

I’ll post those instructions as soon as I receive them because it appears that not everyone is receiving these emails and communications from CCH."

Thanks, Brian!

And to all y'all out there, both nonprofits and their tax pros, who've been freaking about this mess of a missed deadline, you can relax, at least for a few more days.

State update: A quick note for my fellow Texans who file business taxes. The state's franchise tax report deadline also is May 15.

The Texas Comptroller says that it will automatically waive penalties for taxpayers affected by the Wolters Kluwer CCH outage as long as they file and pay by May 22.

This is a penalty waiver only and not an extension of the due date. For a valid extension of your Lone Star State franchise tax filing, file an official request and make the associated payment by May 15. Without a valid extension, the statute of limitation will be based on the May 15 due date.

If you face a May 15 filing deadline in your state, check with your state tax office about relief it might be offering CCH users.

Updated May 14, 2019, with IRS statement. 

You also might find these items of interest:

• IRS technology upgrade will require up to $2.7 billion
• 5 ways to determine whether a charity is naughty or nice
• IRS expands digital options, adding email notifications and virtual tax dispute capabilities

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