By Gary G. Wallace, CPA, Managing Partner
COVID-19 Adds Additional Burden to IRS Systems
Prior to COVID-19, the IRS faced numerous service and technology challenges due to budget funding reductions. Then along came the pandemic followed by the CARES Act and other legislation that provided additional burdens on IRS systems. Now taxpayers are experiencing the negative consequences of these mounting challenges and members of Congress are speaking up as well.
IRS Taxpayer Assistance Delays
Delays have been particularly noticed in IRS taxpayer assistance. According to the House Ways and Means Committee’s first status report on the 2021 filing season, IRS call volumes have tripled over last year with only 25% of taxpayer calls being answered. Of the 6 million taxpayers whose calls the IRS did answer, 3.4 million calls were subsequently directed to an automated message, said the Chairs of the Ways and Means Committee and the Oversight Subcommittee, in a letter to IRS Commissioner Charles Rettig.
Incorrect and Confusing Automated IRS Notices
Frustrations are also increasing for taxpayers due to incorrect and confusing automated IRS notices. We are seeing a significant increase in IRS automated notices addressed to taxpayers and many of these are generated because the IRS internal systems are unable to communicate. For example, the IRS recently sent notices to 260,000 taxpayers, indicating that 2019 tax returns were not filed. The IRS then determined that the notices were in error and subsequently issued a statement “There is no need to call or respond to the CP59 notice because the IRS continues to process 2019 tax returns as quickly as possible,” the IRS said in a February 18, 2021, statement. “The IRS regrets any confusion caused by this mailing.”
IRS Backlog of Unprocessed Taxpayer Returns
The IRS also continues to face a backlog in addressing taxpayer matters which is also very frustrating for taxpayers and advisors. Members of the House Ways and Means Oversight Subcommittee sent a letter to IRS Commissioner Charles Rettig complaining about the backlog of approximately 11 million unprocessed tax returns from the 2019 tax year. While the IRS Commissioner recently indicated that the IRS is caught up on opening mail, much of it remains unprocessed. We are seeing these frustrations as taxpayers are still receiving past due notices sent automatically by IRS computer systems, even when payments were made months ago.
Tax Filing Deadline Approaching
On top of all of this, 2020 tax filing deadlines are quickly approaching. Due to COVID-19, in 2020, The IRS extended filing dates for 2019 returns. As of today, the IRS is not indicating any types of extensions other than the normal allowable extensions for 2020 returns. However, there is concern as to whether additional economic impact payments to individuals would place further burdens on the already stressed IRS systems that may impact tax return processing. To that, several members of the Ways and Means committee have requested that the IRS provide another blanket extension on the 2020 returns.
What does all of this mean for business and individual taxpayers and their advisors? We must continue to work within the IRS system and know that many constituents are sharing in the frustrations. We will keep you updated on IRS tax filing matters and tax filing deadlines. Contact your Opportunity Advisor with questions or Email | Call: 804.747.0000
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About the Author
Gary G. Wallace, CPA, Managing Partner
Gary provides tax and business advisory services to business and individual clients. He has advised clients in various aspects of restructurings, including tax aspects of debt workouts and foreclosures, forgiveness of indebtedness, bankruptcy restructurings and liquidations, establishing liquidating trusts and partner-partnership transactions. Gary also has significant knowledge and experience in individual taxation, business taxation, and advising clients on all aspects of tax matters. He is the Managing Partner of the Firm.
More Insights from Gary G. WallaceThe information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.
