Lawmakers tell IRS to stop sending incorrect tax delinquency notices

Two leaders of Congress’s main tax committee are questioning why the Internal Revenue Service keeps sending notices to taxpayers about missing returns when it’s still catching up on unprocessed mail.

House Ways and Means Committee chairman Richard Neal, D-Massachusetts, and Ways and Means Oversight Subcommittee chairman Bill Pascrell, D-New Jersey, sent a letter Friday to IRS Commissioner Charles Rettig, saying the erroneous notices are causing unnecessary and confusing stress to nearly 260,000 Americans who reportedly received a CP59 notice from the IRS about a missing return for tax year 2019. They pointed out that nearly 7 million individual returns for 2019 have still not been processed yet due to backlogs from the pandemic.

Republicans on the same committee have also been complaining to the IRS about the mail backlogs. Last week, they too sent a letter to Rettig, although they put the number of unprocessed returns at an even higher amount of 11 million, including both individual and business returns (see story). The IRS has been trying to catch up with all the mail that piled up last year at its facilities during the pandemic, even as it was processing two rounds of Economic Impact Payments for millions of taxpayers last year and this year at the same time it was trying to carry out its usual functions.

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“The IRS continues to have a staggering backlog of unprocessed 2019 tax returns that, most recently, was reported to include nearly 7 million unprocessed individual tax returns,” Neal and Pascrell wrote. “In light of these severe processing delays, it is very likely that many taxpayers receiving CP59 notices already filed the returns that the IRS claims are outstanding. For taxpayers who have dutifully complied with their filing obligations, these notices impose unnecessary stress and sow confusion. For IRS employees, these notices create unnecessary work while they struggle to meet the current demand.”

The IRS has acknowledged the error and posted a statement on its website last week saying the notices can be disregarded. “Earlier this month, the IRS issued notices to approximately 260,000 taxpayers stating they haven’t filed their 2019 federal tax return,” said the IRS. “These notices, referred to as CP59 notices, are issued yearly to identified taxpayers who have failed to file tax returns due the prior calendar year (Tax Year 2019). Due to pandemic-related shutdowns, the IRS has not completed processing all 2019 returns at this time. Therefore, the CP59 notices should not have been sent because some portion of the recipients may have filed a return that is still being processed. People who filed their 2019 returns but nevertheless received the CP59 notice can disregard the letter and do not need to take any action.”

The IRS added that there’s no need to call or respond to the CP59 notice because it’s continuing to process 2019 tax returns as quickly as possible. For those taxpayers who haven’t yet filed their 2019 return, the IRS said they should do so “promptly.”

Neal and Pascrell pointed out that the IRS sent out incorrect notices last year as well. The Ways and Means Committee sent Rettig a letter last June about 1.5 million balance-due notices sent with incorrect dates. Last August, the Committee again wrote to him about additional notices sent to taxpayers who had made payments on time, but they remained unopened in the IRS’s mail backlog. That time, the committee asked the IRS to suspend sending notices until it had worked its way through its mail backlog. Then, last October, they wrote to Rettig about erroneous revocation notices sent to more than 30,000 tax-exempt organizations.

“Enough is enough,” they said. “Taxpayers deserve better, and the IRS needs to do better. These repeated errors constitute a massive failure of leadership at the highest level…[T]he IRS should carefully review any notices before sending to ensure that they are correct and timely and that taxpayers are in no way being penalized for delays that resulted through no fault of their own. The Committee will be carefully monitoring the agency’s next steps in this regard.”