The Inside Income Service mailed out practically 90,000 untimely notices and calls for for overdue taxes to taxpayers final yr, regardless that the submitting date had been prolonged.
A report launched Monday by the Treasury Inspector Basic for Tax Administration discovered the IRS issued 89,338 untimely notices and calls for to 87,542 particular person taxpayers about their 2019 tax returns earlier than the COVID-19 submitting date extension of July 15, 2020.
Nevertheless, the taxes weren’t really due but. “The notices confirmed that balances had been owed regardless that the taxes weren’t really due due to the submitting extension,” mentioned the report.
The Inside Income Service headquarters in Washington, D.C.
Samuel Corum/Bloomberg
The IRS did embrace a type with the letter admitting the discover is likely to be untimely, however that also led to confusion for a lot of taxpayers and tax professionals final yr who had bother reaching the IRS over the telephone to make clear the state of affairs. “Though the vast majority of these Notices and Demand included stuffers to elucidate the right discover and cost due dates, taxpayers may very well be confused as to how you can proceed, whether or not they acquired a stuffer of clarification with their discover or not, merely because of the unique notices together with incorrect data,” mentioned the TIGTA report. “The IRS had the chance to stop undue burden to taxpayers by purging the outdated and incorrect notices and sending them at a later date.”
The IRS has been going through a collection of challenges throughout the pandemic that has been straining its overworked employees. Many staff labored remotely final yr throughout the early months of the pandemic whereas hundreds of thousands of items of unopened mail, together with tax funds, piled up in trailers outdoors IRS services. On the similar time, the IRS was purported to be pursuing a extensively publicized Folks First Initiative that was meant to ease the financial impression of the pandemic on taxpayers. The TIGTA report checked out how the IRS dealt with these dueling priorities.
The IRS’s Folks First Initiative included steps to assist taxpayers by offering aid with numerous issues starting from easing cost pointers to suspending compliance actions throughout the interval from April 1, 2020, by way of July 15, 2020. The Folks First Initiative aimed to scale back the tax compliance burden on taxpayers by quickly adjusting and suspending among the company’s most important compliance packages to assist individuals going through the challenges of the pandemic.
However regardless of the Folks First Initiative, 1000’s of automated tax assortment notices continued to be mailed by the IRS’s pc methods, regardless that the company knew the taxes weren’t overdue but for most of the taxpayers receiving them.
“Throughout the begin of COVID-19, the IRS was impacted in some ways,” mentioned the report. “IRS websites closed for months, thus suspending on a regular basis operations akin to mailing notices and receiving and processing correspondence from taxpayers. Throughout this time, the IRS needed to act and make choices as to how you can proceed, and among the choices probably triggered confusion and undue burden to quite a few taxpayers who acquired misguided assortment notices. Upon reopening its print websites, the IRS determined to subject hundreds of thousands of notices to taxpayers that had generated throughout the shutdown, many with misguided discover dates and cost due dates.”
However, the report acknowledged, the IRS did a very good job in offering some types of aid to taxpayers for the interval coated by the Folks First Initiative, together with suspending defaults on installment agreements, not handing over delinquent accounts to non-public assortment businesses, and avoiding the systemic filings of federal tax lien notices, automated levies and seizures.
“TIGTA did establish that, for 23 levies (14 taxpayers) issued by income officers, there was no indication of the required levy approvals throughout the Folks First Initiative time-frame,” mentioned the report. “The IRS took corrective motion by contacting these taxpayers and issuing refunds or credit score transfers on the levied funds. Moreover, TIGTA recognized that 40 of 49 Discover of Federal Tax Lien filings by income officers had been made in error, however the IRS took corrective motion to withdraw them.”
TIGTA advisable that the IRS make modifications to its processes to keep away from sending misguided notices that burden taxpayers. IRS officers partially agreed with TIGTA’s suggestion, saying they consider their resolution of sending the wrong notices was acceptable given the extraordinary state of affairs. “Nevertheless, administration additional said that, ought to future circumstances trigger the IRS to be confronted with the same determination, they may take this report’s suggestion into consideration,” mentioned TIGTA.
“The nationwide state of emergency and the non permanent closure of our Correspondence Manufacturing Providers places triggered the IRS to build up 1000’s of notices of supply, with outdated data,” wrote Darren Guillot, commissioner of the IRS’s Small Enterprise/Self-Employed Assortment unit. “These notices, which inform taxpayers of their obligations and rights, should be supplied to taxpayers. IRS senior management thought of a number of choices, balancing the necessity to adjust to statutory obligations, present correct data to taxpayers, and function throughout the constraints imposed by the pandemic. Based mostly on this evaluation, we concluded that our strategy was the most effective use of our restricted sources that may reduce the chance of confusion on the a part of taxpayers.”
Thus, the IRS included inserts with 87,000 of the notices explaining that the notices is likely to be untimely and advising taxpayers of their rights. “We consider our determination was efficient for the overwhelming majority of taxpayers and minimized the dangers to tax administration,” Guillot wrote to TIGTA. “The pandemic was an unprecedented occasion that required us to make real-time choices in a really resource-constrained setting. Ought to we encounter circumstances sooner or later that may require the same balancing of sources, we’ll take your suggestions into consideration in our determination making.”