IRS updates: Restarting the income tax levy program, and more

The IRS began sending out letters from the Automated Collection System function in June, and restarted the income tax levy program in July. In addition, responsible officers continue to work on nonfiler cases and are sending out notices and billing notices; however, their focus is primarily on egregious cases, such as high-income non-filers, according to Mankowski.

“Unfortunately, there’s still a backlog of paper, and until that’s cleared there will be people that efiled and mailed in their check, the check cleared, but they get notices saying they never paid,” he said. “That’s the downside of restarting the program. They have to do it because otherwise people will get complacent when they think there’ll be no repercussion for not paying.”

“The phone lines are still backlogged due to taxpayers not getting their refunds,” he explained. “They have to go through manual processing, mostly for returns that had additional stimulus funds. Because of time constraints, the IRS didn’t have time to fully reconfigure their computers to recalculate the additional credits due for the additional stimulus money. I tell my clients that if they don’t owe and have proof of payment, hold off on responding to the notices.”

This is a newly created service-wide office headed by Lois Deitrich, a 20-year veteran of the service. “She is working on agency-wide compliance issues, including coordination of promoter activities with other business divisions, including Large Business & International, Tax Exempt/Government Entities, Office of Fraud Enforcement, and Criminal Investigations,” explained Mankowski. “The office works with data analytics and operates like a think-thank to identify promoter behavior prior to auditing returns. Currently, they are working internally but will be shifting their focus to outreach with practitioners, with the intention of identifying tax schemes as early as possible. “

“Basically they’re a resource,” he explained. “Any of the divisions can refer to them. They’re trying to stay a little ahead of the curve, almost spitballing different ideas to determine if these are items that could be deemed as promoter type activity. For example, if they see different industries having out of the ordinary expenses, that could be something that prompts them to investigate further to determine if promoter activities are involved.”

This year continues to be unique and present filing issues, Mankowski noted. “The IRS has hired over 3,200 employees to cover attrition and to increase staffing. As the IRS is attempting to reduce the backlog, Austin and Fresno have been tapped to help process Form 941. As of mid-July, approximately 1.8 million forms have not yet been processed. For returns prior to 2021, 11,000 are still in inventory. These figures are for Form 941 returns — they don’t include Form 940, or Form 941X amended returns.”