A group representing managers at the Internal Revenue Service is pushing back against demands from lawmakers in Congress and tax and accounting professionals who want the agency to stop sending automated tax notices to taxpayers while it remains backlogged during the pandemic.
Last week, the IRS said it would suspend issuance of some of the automated penalty notices, but pointed out that it was required under law to send out many of them and put the ball in Congress’s court to change that and provide more funding for staff and better computer systems (
Taxpayers and tax pros have been getting inundated with the automated notices demanding they send in tax payments and tax returns, even though in many cases the payments and filings have already been sent in the mail. The tax group coalition has been urging the IRS to:
- Discontinue automated compliance actions until the service is prepared to devote the necessary resources to resolve these matters;
- Align requests for account holds with the time it takes them to process any penalty abatement requests;
- Offer a reasonable cause penalty waiver, similar to the procedures of first-time abate, or FTA, administrative waivers, without affecting the taxpayer’s eligibility for FTA in future tax years; and,
- Provide taxpayers with targeted relief from both the underpayment of estimated tax penalty and the late payment penalty for the 2020 and 2021 tax year.
Last week, lawmakers wrote to the IRS asking it to stop the penalties and pause automated collections from taxpayers whose returns are still caught up in the backlog of millions of unprocessed tax returns (
Now a group of managers at the IRS is weighing in with a set of responses to the charges. The Professional Managers Association, a group formed in 1981 by IRS managers as a national membership association representing the interests of professional managers, management officials and non-bargaining unit employees in the federal government, released a
“PMA echoes the lawmakers’ enthusiasm for providing high quality and effective taxpayer services,” said the group. “We are also equally concerned regarding the current state of the IRS. However, there is an apparent disconnect between congressional demands and the IRS’s practical capacity to address them. This disconnect exacerbates inefficiencies and results in negative taxpayer experiences, as well as excessive burden on our members and their staff. Tax policy and tax administration must be better connected, or taxpayers and PMA members alike will continue to struggle through each tax season while the IRS is blamed for problems outside of its control."
In response to the demand that it halt automated collections from now until at least 90 days after April 18, 2022, the managers said this recommendation would be possible for the IRS and doesn’t require a significant lift.
“However, lawmakers should clarify they are only requesting a pause on automated lien/levy issuance,” said the PMA. “The automated collection team would still need to function to help taxpayers establish payment plans, among other related duties.”
In response to the demand that it delay the collection process for filers until any active and pending penalty abatement requests have been processed, the group responded that technically, this is already part of the IRS’s procedure. “The issue that arises in practice is that when the abatement request is sitting in unopened or unsorted mail, we cannot know if the request is pending if we do not know it is in the mail room,” said the PMA. “When the IRS does scan an abatement request into its inventory, collection actions are held in abeyance until the case is closed. We understand the mailroom backlogs are an area of concern for Congress and taxpayers. In the short term, Congress can ease the burden by passing robust appropriations to allow for the hiring, onboarding and training of new employees. While the IRS is operating under a continuing resolution, these hiring and training objectives are very difficult to accomplish, if possible even at all. In the long term, dedicated multiyear funding for technology modernization would allow the IRS to improve electronic systems and take significant burdens off paper processing.”
In addition to asking for more staff and funding, the IRS managers group objected to several other demands from the lawmakers, however. In response to the request for the IRS to streamline the reasonable cause penalty abatement process for taxpayers impacted by the COVID-19 pandemic without the need for written correspondence, the PMA said the objectives of this request were unclear and would cause additional service delivery problems.
“Taxpayers are already eligible for a ‘first time abatement’ without any documentation,” said the PMA. “Therefore, this change will particularly impact individuals who repeatedly incur penalties. The IRS does not typically accommodate repeat offenders and it is unclear why ‘COVID-19’ is a valid reason for an individual to repeatedly fail to file and/or pay their taxes in a timely manner. Even so, this reform would presumably require taxpayers to call or visit the IRS to receive their abatement. Given that telephone service delays are already a point of frustration for taxpayers and IRS call centers are overburdened and understaffed, driving additional traffic to those phone lines will likely exacerbate existing problems. The individuals ultimately benefiting would be taxpayers with a history of noncompliance, while diligent taxpayers who are historically compliant experience further negative impact on customer service bandwidth.”
The IRS managers also threw the ball back in Congress’ court as far as providing targeted tax penalty relief for taxpayers who paid at least 70% of the tax due for the 2020 and 2021 tax year. The group pointed out that Rep. Judy Chu, D-California, has introduced the Taxpayer Penalty Protection Act (H.R. 5155) to do this.
“The legislation has bipartisan support and is currently being considered in the House Ways and Means Committee,” said the PMA. “We encourage the U.S. Senators who signed this letter to introduce and support companion legislation. It is the job of Congress to pass legislation, which executive branch agencies such as the IRS will gladly execute. However, calling upon the IRS to unilaterally engage in this activity mid-filing season is catastrophic for the successful execution of the season. Mid-season, retroactive tax law changes require entire components of the IRS to halt and reprocess their inventories. When a completed tax year is involved, this leads taxpayers to file amended tax returns which only further hamper effective tax administration. This causes severe delay and confusion and dramatically increases the potential for errors — making the tax filing season more challenging for everyone involved. Even a reform meant to increase efficiency, results in the opposite when implemented in this manner. We highly discourage Congress from requesting the IRS engage mid-season retroactive tax changes. Rather, Congress should pass legislation on this issue to go into effect in subsequent filing seasons.”
The group also pushed back against expediting the processing of amended returns and providing the Taxpayer Advocate Service and congressional caseworkers with timely responses, and suggested the request defied logic.
“It is our understanding that TAS is not taking these cases because TAS is also overwhelmed with work and not because the IRS is delayed in responding to them,” said the PMA. “The amended return problem for small businesses is one of Congress’ own making. For example, Congress implemented the Employee Retention Tax Credit in such a way that many businesses had to amend their employment tax filings. Amended employment tax returns were once a rare occurrence and now the IRS is drowning in them. Statutorily, the agency has no hard deadline to process an amended claim and frequently the IRS changes the processing timeframe depending on workload. For example, during a slow period, the timeframe may be eight to 12 weeks. During filing season, it may increase to 12-16 weeks. At this time, amended returns are a lower priority because the IRS still has unprocessed original returns. What Congress may not understand is that some of the amended claims may be changes to original returns that have still not processed. As of Dec. 31, 2021, the IRS had more than 22.5 million original tax returns in its pipeline. We must process the originals before we can process amended returns.”
The group also scoffed at the notion of prioritizing amended returns: “Finally, from an equity perspective, it is unclear why Congress would place amended returns ahead of original returns, particularly given that amended returns often signal an oversight or error was made in the original return. Why would Congress want these individuals to be able to 'cut the line' ahead of the 9.2 million taxpayers whose original returns were not yet transcribed? Instead, Congress should not pass laws which will lead to high numbers of amended claims. Congress should encourage constituents to wait until they receive all necessary tax documents and information before filing an original return to decrease the likelihood that amendments are required post-filing.”
