Since the start of the pandemic, the IRS has faced significant struggles attempting to process individual, and certain federal business tax returns. The combination of new tax law implementation, processing of several economic stimulus payments, administration of Child Tax Credit Advances, and staffing shortages have led to these issues. According to the 2021 National Taxpayer Advocate – Annual Report to Congress, there are currently 2.3 million unprocessed amended individual returns, and 2.8 million unprocessed Form 941s (from both 2020 and 2021). While the agency openly admits the issue, a problem for taxpayers has been automatic notifications. These are auto-generated letters that inform taxpayers when outstanding balances (amongst other situations) have arisen. However, due to the backlog, these notifications are often inaccurate because they are based on information that is outdated. To address the issue, the IRS recently announced the suspension of certain automatic notifications. To help clients, prospects, and others, Hanson & Co has provided a summary of the key details below.
Collection Notices Suspended
On February 9, 2022, the IRS announced it would temporarily suspend mailing more than a dozen individual taxpayer letters, including automated collection notices. The letters communicate to taxpayers when they owe money or when there’s no record of correspondence.
IRS Commissioner Chuck Rettig commented that “We are working hard, long hours pushing creative paths forward to be part of the solution, rather than the problem. Our employees continue to expend every effort to balance a confluence of multiple, unprecedented demands − including successfully starting the filing season, working our inventory of unprocessed tax returns as well as looking for additional ways to minimize burdens for taxpayers, tax professionals, and businesses.”
The following individual and business notices are among those that are suspended:
- CP80 – Generally sent when the IRS credited payments and/or other credits to a taxpayer’s account for the tax period shown on the notice, but the IRS hasn’t received a tax return for that period.
- CP59 – Notice there is no record of a prior year return being filed.
- CP501 – Reminder there is an outstanding balance on a taxpayer’s account.
- CP503 – The second reminder there is an outstanding balance on a taxpayer’s account.
- CP504 – Final notice that a payment has not been received for an unpaid balance. This includes a Notice of Intent to Levy.
- 2802C – Notification sent to taxpayers who have been identified as having under-withheld federal taxes from wages.
- CP259 – Notice sent to business taxpayers when there is no record of a prior year(s) return being filed.
- CP518 – Final reminder notice that there is no record of a prior year(s) return being filed.
It is important to note that not all notices are suspended. Some letters are legally bound to certain timeframes and cannot be suspended. It’s also important to note that just because some notices aren’t going out right now, that doesn’t mean that outstanding tax balances are going away. Fines, penalties, and interest will still accrue, and taxpayers are still responsible for paying all taxes owed.
Other Important IRS Changes
Other than suspending the above notices, the IRS is taking other steps to help taxpayers. This includes requiring overtime, reassigning employees, transferring inventories, and deploying “experienced surge teams.”
The IRS is also using new technology to allow employees to better sort through, review, and process returns with substantial errors at a rate significantly faster than in the past.
For returns with questions about the Child Tax Credit advance payments, the IRS is “putting in place procedures to assist with handling processing which will help keep refunds moving.”
In addition, the facial recognition requirement for creating new online accounts is no more. While this effort was meant to help secure taxpayer identity, the IRS determined that other authentication processes will better enable taxpayers to log in and file their returns.
Hanson & Co works with middle-market companies and high-net-worth individuals in Denver, Colorado, and across the country. Regardless of the complexity of your need, our team is ready to help you. Please complete the form below, and we will follow up with you shortly.