2019 SPE Tax Notice Regarding Form 1123

Pennsylvania EITC Tax Notice

Most of Central Pennsylvania Scholarship Fund Special Purpose Entity Donors for 2019 are getting a tax notice instead of a refund.  We have avoided these notices for most of our donors for 6 years but this year we could not avoid the tax notice due to Covid.  The notice states "The pass thru entity allocating the credit claimed on your PA Schedule OC has not submitted the proper paperwork".  We have confirmed directly with the PA Dept of Revenue agent who processed our 1123 SPE forms that they are in fact all processed and so this notice is simply because PA Dept of Revenue agents are exclusively working from home and the required compliance review did not happen in time so the computer simply generated an incorrect notice automatically.  

We reached out to the director of tax credit processing Matt Forti and his solution for addressing these notices is to send an email to [email protected] because the agents are working from home.  We suggest you send a copy of the notice and the taxpayers PA 40 page 1 and 2 along with a copy of the PA SPE K-1.  Explain you have checked with the SPE and they have verified the 2019 1123 was processed.  Ask that your personal tax return clear the tax credit compliance check and be sent to the refund unit to process your 2019 PA tax refund. 

This is a different process than in the past for dealing with tax notices but Matt Forti's advice makes sense due to Covid and the agents work from home status that email is going to be the best solution.  

To follow up after the notice has been emailed you can not reach out again as a second request will not get a reply.  You should use the process below to check on your clients refund, prioritize your clients requests or follow the refund time frame until a check is written.  

So sorry for this problem with our donors.  We have done everything in our power to avoid problems where the tax credit donation requires individual donor/taxpayer outreach but I believe outreach is necessary this year and we can not do this process for you due to privacy.  

Pennsylvania Request for 2019 PA Refund Processing

In August Pennsylvania begins issuing refunds for PA 40 individual tax filings with refunds requested that include an EITC tax credit.  The state delays the refunds until the start of their fiscal year to do the first compliance check which is to make sure the refund is authorized and included properly on your tax return and a properly filed 1123 form was submitted which is done by our charity in April.  If your refund has not cleared this compliance check you will have received a notice.

In order to get to the top of the list for refund processing in August you can make one request of the state using this method. 

SUBMIT A QUESTION website.  Here are the steps:
1.  Click submit a question tab.
2.  Log in using user name and password or set one up.
3.  Select a catagory "individual taxpayers"
4.  Subject 2019 PA 40 tax refund with a PA EITC tax credit on a K-1
5.  Question - my refund is listed as delayed.  My name is XXXX and the last 4 digits of my social security number are XXXX.
Can you please submit my refund for final review?

PA Department of Revenue takes 60 days to issue the refund after this first contact and they will respond in 48 hours to your question by email telling you they are working on your refund.  After 45 days you can verify that the refund is coming by entering information in the PA where is my refund? website or you will receive a letter letting you know a refund is coming.  If you do nothing your refund will still arrive in October typically but if you contact the state multiple times it will continue to reset your 60 day wait.  

If there are other issues with your PA 40 filing your accountant can help or your state representative can get involved.  This delay in refunds related to Pennsylvania EITC tax credits is frustrating but the delay is justified so the state makes sure they send the correct refund to the correct person.  

​Each SPE member is strongly advised to consult their tax advisor for the advice applicable to their specific circumstances.  This article does not constitute tax advice.