Unintended Consequences

August 2020

In response to the COVID-19 pandemic, the IRS granted deferments in tax deadlines as well as changes in penalties and interest for late-filers. We reported the details in the April issue of the Blair Bulletin. These concessions were intended to reduce taxpayer stress … already strained by spread of the coronavirus.

While there may be taxpayers who have benefited from the above moves, our phone and email communications are rife with frustration, confusion and sometimes a touch of panic. Some anonymous examples:

Where’s my refund? A client dutifully filed the 2019 return electronically on March 28. As of this writing the IRS has not responded by paying a refund due of $10,000.

Why hasn’t my tax payment check cleared? In May, executors of an estate paid well in excess of $100,000 in taxes due. The payment has yet to be processed by the IRS.

Can someone at the IRS answer my question? Phone calls to the agency can leave the taxpayer on “hold” sometimes for hours. Important clarification requests go unanswered with the taxpayer left without knowing what to do next to remain in compliance.

We could go on … but we won’t. You get the picture and may well have endured similar or even more dramatic experiences. So, given the prevalence of dissatisfaction, let’s take a look at the causes and anticipated remedies.

We’ve Never Done It Like That Before!

In an attempt at fairness … not an excuse … the deferments in tax deadlines along with changes in penalties and interest for late-filers has put a tremendous strain on IRS resources. Procedures that have been in place and functioning are now either scrapped or subject to major revisions.

Couple that with the major pressures on IT to deliver software updates to accommodate the revised dates and details for taxpayer compliance. And then there is the human resource-based issues that require substantial re-training.

Mail Delivered, Stored … Processing Delayed

While many IRS offices remained shuttered prior to this year’s tax season, trailers were set up outside IRS workplaces as receptacles for taxpayer mail. One account puts the IRS unopened mail correspondence inventory at approximately 12 million pieces. IRS employees who returned to address the tax season were met with the proverbial “drinking from a fire hose” analogy as they sorted through and processed existing mail while the daily deluge of correspondence continued unabated.

The unfortunate and unintended consequences for taxpayers have been that the IRS continues to send payment demand notices to taxpayers whose correspondence and payments remain unopened … but who have already made the payments that the IRS deems to be due.

The IRS admits to being short on staff for opening the mail, plus dealing with the overwhelming volume of phone calls from taxpayers. The agency strongly urges against calling the IRS. “Due to high call volumes, the IRS suggests waiting to contact the agency about any unprocessed paper payments still pending,” said the IRS. “See www.irs.gov/payments for options to make payments other than by mail.”

IRS Immediate Response to Complaints

Earlier this month, the IRS initiated a short-term fix for taxpayer checks caught in the backlog of unopened mail. As detailed on the IRS webpage … pending check payments and payment notices will be posted as of the date received rather than the date when they are processed by the IRS. Note: To avoid penalties and interest, the IRS strongly advises taxpayers not to stop payment on their checks with their bank and ensure availability of funds, as the IRS will eventually get around to processing them.

Summary & Takeaways

For the moment, the best course of action for affected taxpayers is “wait-and-see”. Surely, remedy for the backlog will be forthcoming and questions sorted through and answered. Stay tuned. We’ll keep you posted as further developments surface.

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