Significant Concern with the IRS Correspondence Audit Function
Potential Revenue Raisers in the Reconciliation Bill

NTA Update on the 2020 and 2021 Filing Season Challenges

A recent blog by National Taxpayer Advocate Erin Collins indicates that the IRS has reduced its 2020 tax return inventory from 35 million in May to 17.6 million as of Sept. 11. This includes 10 million returns in the queue and 5.7 million suspended while awaiting further information from taxpayers (possibly in that unprocessed mail). The IRS expects another four million 2020 returns to be filed by Oct. 15.

Oh, The Frustration!

We know that the IRS has been facing numerous hurdles and additional job functions since the start of the pandemic. However, the tax professional community’s patience is about equal to the IRS’ responsiveness at this point. Preparers and their clients are frustrated with the high volume of manually processed returns, limited information available on return status, erroneous notices, refund delays and the difficulty reaching IRS employees. To manage expectations, the public needs transparency along with clear and concise updates on the processing of returns and status of refunds.

Faulty Math Error Notices

The NTA also expressed a concern that the IRS had omitted on some notices critical language providing taxpayers the right to request an abatement. In notices to 6.5 million taxpayers on potential Recovery Rebate Credit math errors, the IRS failed to acknowledge that taxpayers have 60 days to question it, a significant compromise of taxpayers' rights. Preparers know this but, generally, taxpayers may not know their right to challenge the IRS’ position. The IRS plans to fix the procedural problem with a supplemental notice to these taxpayers by Oct. 1, 2021, with the abatement language and restart the 60-day clock. The Taxpayer Advocate Service (TAS) will be proposing a legislative change to require that the abatement language be included in all math error notices for clear notification of taxpayer rights.

 Let’s Go Back a Year

If a practitioner or taxpayer filed an original return during 2020 and has “confirmed” that the IRS has no record of receiving it, TAS recommends refiling the original return on paper, attaching a cover letter and/or a note across the top that the return is being resubmitted, and including information about when the first return was filed. If there is an outstanding tax due, the resubmission may trigger the failure-to-file and failure-to-pay penalties and interest. TAS is asking the IRS to consider applying an abatement that will not result in the use of the taxpayer’s first-time abatement, thereby preserving it for future use.

NTA Blog: Bumps in the Road Sequel: Update on the Filing Season Challenges: Part I - Taxpayer Advocate Service (irs.gov)

NTA Blog: Bumps in the Road Sequel: Update on the Filing Season Challenges: Part II - Taxpayer Advocate Service (irs.gov)

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