Wednesday, January 26, 2022

THE IRS IS TOTALLY FU-ED!

 


The disastrous fallout from the Internal Revenue Service’s decision to completely shut down for over 6 months in 2020 in reaction to the pandemic continues. 

* Taxpayers continue to be frustrated by erroneous notices from the IRS - including those saying the 2020 tax return they had timely and correctly filed with a full payment of the balance due have not been received, although the same notice acknowledges receipt of the payment.

* Letters sent out by the IRS identifying the amount of advance Child Tax Credit payments and economic stimulus payments issued in 2021 – information necessary for the proper preparation of 2021 income tax returns - contain errors.

* Correspondence in response to IRS notices related to alleged outstanding tax debts and other issues have been ignored.

* Many taxpayers are still waiting to receive refunds for timely filed 2020 federal tax returns.

The IRS is dealing with a backlog of millions of unprocessed 2020 income tax returns, amended returns and collection-related and other correspondence.  

Most state tax agencies, like the NJ Division of Taxation, also closed down their offices during 2020, but employees were able to competently process returns, issue refunds, and deal with correspondence during this time with minimal delays.  The problems exist only with the IRS.

I do sympathize with the current plight of honest and competent IRS employees, which I expect is the majority of employees.

What to do?  Unfortunately, the answer is to just be patient.  And do not let any tax year 2020 issues delay the preparation and filing of your 2021 federal and state income tax returns.  If the 2021 IRS Child Tax Credit and/or Economic Impact Payment letter(s) is/are wrong use the correct information from your financial records to reconcile these payments on your 2021 return.

What not to do - 

I need to continually say this – there is absolutely nothing whatsoever your tax preparer can do to expedite the processing of your 2020 return, amended return or correspondence, or the issuance of your 2020 refund.  And - your tax preparer had absolutely nothing to do with the delays to your return, correspondence or refund.  While you should send copies of any IRS or state tax correspondence you receive to your preparer DO NOT call or email him or her if your refund is late.  And, looking forward, DO NOT call or email your tax preparer to ask about your 2021 refund if that is late. 

It will take many, many, many months for the IRS to fully recover from its 2020 shutdown – if it ever does.

What the IRS needs to do is, as I have said from the beginning of this mucking fess, and as a coalition of tax preparer organizations have recently requested the Service to do, immediately cease all collection activities until it has completely processed the backlog of correspondence.

The Service also needs to develop a detailed strategic plan for dealing with office closures in the event, heaven forbid, something like COVID happens again in the future.

And, nothing new here, Congress needs to properly fund the Internal Revenue Service.

So, the bottom line – be patient with the IRS and do not bug your tax preparer.

TTFN










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