When the U.S. Division of the Treasury was tasked with a myriad of pandemic-related duties in 2020 and 2021, it ought to have been clear then that Treasury and the Inside Income Service would wrestle with basic duties in 2022.
Battle, nonetheless, will not be a robust sufficient phrase to encapsulate the issues the IRS has confronted this submitting season. Excessive return and correspondence backlogs on the IRS imply that taxpayers are receiving complicated misguided notices, companies are desperately ready on Worker Retention Credit score refunds, and taxpayers and practitioners are spending hours dialing the IRS making an attempt to achieve an worker.
Sadly, the hole between the Treasury Division’s dire warnings about this submitting season and the actions they’ve been prepared to take to assist taxpayers is substantial. The IRS nonetheless has a chance to indicate taxpayers that it understands the necessity to do extra to assist people and companies who’re doing their greatest to adjust to our nation’s tax legal guidelines throughout a troublesome submitting season — however the clock is ticking to enact measures that may supply fast aid.
Over the course of the primary quarter of 2022, the IRS introduced a sequence of measures supposed to blunt the affect of the backlog on taxpayers. These measures embody the creation of two “surge” groups to take care of returns, pausing automated notices to taxpayers, delaying a deliberate closure of an IRS processing facility and securing direct hiring authority to extra rapidly rent IRS workers.
Whereas I applaud these actions, I query the pace at which these measures have been rolled out contemplating Commissioner Rettig publicly said on March 17 that the IRS has had a backlog plan “for the reason that pandemic started.” Why the IRS has not exhausted the complete arsenal of instruments, sources and aid at its disposal is confounding.
By default, the IRS will apply a “first-time abate” waiver for anybody requesting penalty aid, however that possibility can be utilized solely as soon as each three years. The IRS may announce immediately that it’s going to supply taxpayers a particular waiver for penalties ensuing from COVID or IRS backlog points. Providing a particular “backlog” or COVID penalty waiver would protect using first-time abate. Moreover, this particular waiver must be streamlined to keep away from a written request that can additional burden the backlog of unprocessed mail.
One other measure the IRS may announce immediately could be that it’s going to align requests for account holds with the time it takes the IRS to course of any penalty abatement requests. For instance, if an account is on maintain for eight weeks, however it takes the IRS 20 weeks to course of the penalty abatement request, this might lead to additional escalation of the discover (liens or levies) to the taxpayer. The account maintain ought to align with how lengthy it at the moment takes the IRS to course of the request.
Lastly, the IRS ought to postpone its self-imposed use of the Schedules Ok-2 and Ok-3 till the 2023 submitting season. Whereas supposed to offer consistency within the reporting of foreign-related data, the instruction modifications throughout a busy tax season, coupled with the complicated transitional aid and with the dearth of e-filing for these schedules, will, we worry, solely add to the backlog.
Greater than 200 bipartisan, bicameral members of Congress have joined the AICPA, the Nationwide Taxpayer Advocate and a various practitioner coalition to name for these or comparable suggestions. The straightforward magnificence of those measures is that they are often carried out immediately and would scale back taxpayer contact with the beleaguered IRS.
It’s perplexing that the IRS didn’t announce these or comparable measures again in January when it publicly acknowledged how irritating this submitting season could be. There may be nonetheless time to undertake these measures, and I urge the IRS to offer them — and taxpayers — the consideration they’re due.
