EAs call on IRS to restart balance due notices

The National Association of Enrolled Agents is asking the Internal Revenue Service to resume sending reminder notices immediately to non-filers and those with balances due of more than $10,000 after a years-long pause on such notices due to the pandemic and an IRS backlog.

The president of the NAEA, Cynthia Leachmoore, sent a letter last week to IRS Commissioner Daniel Werfel  making those requests while also asking him to also provide tax practitioners with continuous, authorized, firm-level access to client account information to resolve tax issues. She noted that in March 2020, in response to the COVID-19 pandemic, the IRS unveiled its People First Initiative, temporarily suspending both liens and levies initiated by field revenue officers as well as automatic, systemic liens and levies. Nearly a year later, the IRS also responded to a backlog of original and amended tax returns and other correspondence by suspending a dozen of its automated letters and notices, including non-filer notices and notices generated by its Automated Collection System when a taxpayer owes additional taxes. 

"EAs understood that extraordinary times called for extraordinary measures," wrote Leachmoore. "Yet those times are past. IRS returned its bargaining unit employees to their offices in May 2022 and declared it expected paper return and correspondence inventories would return to normal by the close of 2022. While field collection appears to have ramped up from pandemic lows, the lion's share of collection volume is generated from ACS, which has essentially stopped issuing collection reminder notices. Further, IRS non-filer communication has dropped precipitously."

She pointed out that in fiscal year 2022 the IRS issued well under 200,000 non-filer inquiries, even as the number of known non-filers spiked to over 11.3 million, up from 7.9 million in fiscal year 2021. 

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"The significant reduction in IRS compliance activity erodes trust in the system and leads to uneven enforcement," said Leachmoore. "IRS leadership informed stakeholders the agency would begin to return ACS and non-filer activity to normal several times in 2023. However, the pause on basic compliance activity continued to be extended with no specific restart date or reasonable justification for the delay. Most recently, the IRS leadership has indicated it will likely not restart suspended notices until sometime after the new year."

She said EAs have seen the negative impacts of the suspended notices on their taxpayers.

"When taxpayers do not hear from the IRS, and are not subject to automatic enforcement actions, compliance inevitably goes down," Leachmoore wrote. "EAs have seen this pattern in recent years: It used to be that people could delay but eventually [the] IRS would catch up. Some clients haven't been assigned to the field or ACS and are just waiting out the statute."

She gave the example of a mortgage broker who hasn't filed since 2013 and was intentionally waiting to file those returns because she had several large retirement distributions and real estate transactions in 2014-15. The logic was, "The longer I go without filing, the less likely I'll have to pay taxes on the 2014-15 balances." 

She pointed out that National Taxpayer Advocate Erin Collins, who originally supported the initial pandemic ACS notice suspension, has since pivoted, writing in a blog post last month, "My concern is the longer the notices are delayed, the more that taxpayers may have a false sense that the IRS may have forgotten about their tax balance — or maybe taxpayers fail to understand penalties and interest continue to accrue until final payment."

The NAEA would also like the IRS to provide tax practitioners with improved access to clients' tax accounts.

"In addition, the IRS must help ensure a better customer experience for the taxpayer and meet taxpayers where they are by providing practitioners with continuous, authorized, firm-level access to client account information to resolve tax issues," Leachmoore wrote. "Client account information is the baseline for preparing any new client (including non-filers) tax return and responding to an IRS notice. Firm-level access would allow a firm to access client account information through e-Services Transcript Delivery Service without calling the IRS (and without pushing reluctant clients through opening their own accounts) and will allow the IRS to leverage tax pro expertise in their efforts to improve taxpayer compliance."

The NAEA is concerned about the impact on future tax compliance.

"EAs are on the front line of compliance, fear a public perception that there are no consequences to failing to file or pay taxes, and are concerned that this system of voluntary compliance is being eroded," said Leachmoore. "As always, Enrolled Agents are committed to helping taxpayers comply with their filing, reporting and payment obligations as well as assisting taxpayers in exercising their rights. NAEA would be pleased to partner as the service moves forward with these necessary steps."