IRS suspends many of its automated notices

The Internal Revenue Service said Wednesday it is suspending more than a dozen automated letters it sends out to taxpayers, including collection notices, balance due notices and unfiled tax return notices, after coming under pressure from lawmakers and tax professionals to first catch up on its backlog of unprocessed returns.

The IRS has been facing criticism from a coalition of tax professional groups, as well as members of Congress who have been hearing from their constituents. On Tuesday, lawmakers on the House Ways and Means Oversight Subcommittee convened a hearing to discuss concerns from National Taxpayer Advocate Erica Collins about the backlog of millions of unprocessed tax returns from last year amid IRS staffing shortages, as well as the flood of automated notices that have been generated by the IRS’s computer systems with little opportunity of contacting someone at the IRS for help with responding. A coalition of tax professional organizations, including the American Institute of CPAs, the National Association of Tax Professionals, the National Association of Enrolled Agents and the National Conference of CPA Practitioners has been urging the IRS to suspend the automated collection notices. They held an online press conference Tuesday to discuss the continuing problems that taxpayers are facing from the notices, despite recent steps by the IRS to at least stop the automated CP80 notices in cases where a tax payment has been received and credited, but has no record of the tax return yet being received (see story). The IRS is now pledging to go further in suspending the automated notices to help soothe anxious taxpayers.

The IRS announced Wednesday evening the suspension of more than a dozen other letters, including the mailing of automated collection notices that are typically sent when a taxpayer owes additional tax, and the IRS has no record of a taxpayer filing a tax return.

The mailings that are being suspended now include balance due notices and unfiled tax return notices. The IRS pointed out that it entered this tax season with several million original and amended returns filed by individuals and businesses that haven’t yet been processed due to the challenges of the pandemic and it’s taking this step to help avoid confusion for taxpayers and tax professionals.

“IRS employees are committed to doing everything possible with our limited resources to help people during this period,” said IRS Commissioner Chuck Rettig in a statement. “We are working hard, long hours pushing creative paths forward in an effort 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 burden for taxpayers, tax professionals and businesses. Our efforts are not limited to suspension of these additional letters and the possibility of similar actions going forward. We have redeployed and reallocated resources throughout the IRS and have implemented innovative strategies in an ongoing effort to provide a meaningful reduction in our inventories.”

The agency said the automatic notices have been temporarily stopped until it works through the backlog. The IRS plans to continue to assess the inventory of prior year returns to determine the appropriate time to resume the notices.

The IRS cautioned that some taxpayers and tax pros may still receive the notices during the next few weeks. But generally, there’s no need to call or respond to the notice as the IRS will continue to process prior year tax returns as quickly as possible.

“However, if a taxpayer or tax professional believes a notice is accurate, they should act to rectify the situation for the well-being of the taxpayer,” said the IRS. “For example, the IRS cautions people with a balance due that interest and penalties can continue to accrue. In addition, IRS employees may in select circumstances issue notices to particular taxpayers to resolve specific compliance issues.”

The IRS insisted it does not have the authority to stop all notices as many are legally required to be issued within a certain timeframe. But it will continue to look at making other changes and system modifications that it may be able to implement to help taxpayers with various issues. The IRS will also continue to make information available to taxpayers throughout the filing season.

The IRS is still encouraging taxpayers who have a filing requirement and haven’t yet filed a prior-year return or paid the taxes due to do that promptly as the interest and penalties will continue to accrue.

The suspended notices include: