February 14, 2022

IRS Suspends Automatic Notification Letters

Dealing with the Internal Revenue Service (IRS) can certainly be a challenging endeavor for Atlanta individuals, businesses, and organizations. There are numerous notices that are sent including those requesting additional information, notices of balances due, changes in refund amount, questions about information on the return, or notifications about delays in return processing. Although part of standard operating procedure, the significant backlog of unprocessed returns (and other communications) has resulted in inaccurate automatic notices being sent. The combination of budget constraints, staffing shortages, and worker shortages, has created a “perfect storm” at the IRS. In fact, the volume of unprocessed returns includes 2.3M unprocessed amended individual returns and 2M unprocessed employee quarterly tax returns. Although it will be some time before unprocessed returns will be addressed, new steps are being taken to relieve issues caused by inaccurate automatic notifications. The IRS recently announced a temporary suspension of over a dozen IRS notices, including automated collection notices. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key details below.

State of the IRS in 2021

In the most recent National Taxpayer Advocate – 2021 Report to Congress, it was clearly outlined just how difficult the situation has been for both the agency and taxpayers.  The combination of sending out billions of dollars in economic stimulus and relief payments while pushing through tax law changes made conditions very challenging. Of course, the short timelines made a challenging situation almost impossible to navigate. In other words, to meet these deadlines attention and focus had to be diverted away from other tasks.

To illustrate the impact, during the last 12 months only 11 percent of calls got through to customer service with an average wait time of 23 minutes. It took an average of 199 days (about 6 and a half months) to process responses to proposed tax adjustments, compared to just 74 days (about 2 and a half months) in the fiscal year 2019.

Unfortunately, the online service did not offer better results. According to National Taxpayer Advocate Erin Collins, “The IRS’s online tool “Where’s My Refund?” did not provide information on unprocessed returns or explain reasons for delays, where a return stood in the processing pipeline, or tell what actions taxpayers could take to expedite refunds.”

As a result of these limitations and challenges, taxpayers faced several difficulties in dealing with the IRS in 2021. A TAS survey indicated that the top ten most serious problems are:

1. Processing and refund delays
2. IRS recruitment, hiring, and training
3. Telephone and in-person service
4. Transparency and clarity
5. Filing season delays
6. Online accounts
7. Digital communication
8. E-filing barriers
9. Correspondence audits
10. Collection

Additional Collection Notices and Other Letters 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 money is owed or when there’s no record of correspondence. The reality is that with millions of returns from 2021 still not processed, the potential for confusion and miscommunication will be extremely high.

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 the burden for taxpayers, tax professionals, and businesses.”

It’s unclear when the IRS will resume mailing automated notices and will depend on when the agency works through the backlog of unprocessed returns. In the meantime, some taxpayers and tax professionals might still receive notices over the next few weeks; there’s no need to reach out to the IRS right now.

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.

Contact Us

Considering the significant processing issues, it is not uncommon for an Atlanta individual or business to receive a notice which does not reflect the status of an open issue with the IRS. While it is certainly important to address requests from the agency, the recently announced changes will help to eliminate confusion. If you have questions about the information outlined above or need assistance with a tax planning or compliance issue, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.