A coalition of 11 stakeholders groups from the tax practitioner community are urging the IRS to take action to reduce unnecessary burdens for taxpayers and practitioners during the upcoming filing season. IRS staff are currently processing a meeting request so that the practitioner groups can elaborate on their recommendations and respond directly to any questions the IRS may have.
The group includes those representing Latinos, Blacks, small businesses, and low-income taxpayers. In addition to the American Institute of CPAs, the group includes of Latino Tax Pro, the National Association of Black Accountants, the National Association of Enrolled Agents, the National Association of Tax Professionals, the National Conference of CPA Practitioners, the National Society of Accountants, the National Society of Black CPAs, the National Society of Tax Professionals, Padgett Business Services, and Prosperity Now.
In a letter, the coalition urges the IRS to address the situation faced by practitioners and taxpayers during the filing season ahead.
“Currently, the IRS still has an unprecedented number of unprocessed returns in comparison to years before the pandemic,” they stated in the letter. “Consequently, the IRS sends numerous mistargeted notices, liens and levies. Additionally, the IRS is only answering 9% of all calls, and only 3% of calls regarding individual income tax returns, which prevents taxpayers from resolving these straightforward issues.”
To reduce the need for taxpayers and tax professionals to communicate with the IRS due to the persistent and erroneous notices, the coalition recommends that Treasury and the IRS should:
- Discontinue automated compliance actions until the IRS is prepared to devote the necessary resources for a proper and timely resolution of the matter.
- Align requests for account holds with the time it takes the IRS 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.
- 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.
The letter noted that the COVID-19 pandemic has created enormous challenges for taxpayers, tax professionals and the IRS: “It is time to take steps to ameliorate the situation. Implementing reasonable penalty relief measures, that the IRS can offer immediately, are necessary to help not only taxpayers and tax professionals but also the IRS during these challenging times.”
“The problems are highlighted by the fact that the IRS is sending out notices to taxpayers that did pay and in fact their payment has cleared,” noted Stephen Mankowski, tax chair at NCCPAP, one of the members of the coalition. “There are so many cases where people have responded but are getting automated letters putting actual levies and liens against people, and if they try to call they can never get through. The IRS is so far behind that they can’t get to all of the issues.”
Much of this stems from the fact that the IRS is absolutely underfunded, Mankowski observed: “We support giving adequate funding to the IRS.”
Roger Harris, president of Padgett Business Services, another member of the coalition, agreed. “Underfunding of the IRS is a reality. The pandemic made a bad problem worse,” he said.
It’s been suggested that a moratorium on penalties will help the habitual offenders, but that’s unavoidable, according to Harris: “Anytime you have penalties reduced there’s the potential that some bad actors will benefit. But is that enough of a reason to not grant it to the majority who are trying to play by the rules?”
“It really comes down to a question of fairness,” he said. “Taxpayers are being asked to respond in a timely manner and yet the service is not responding in the same timely fashion. Taxpayers and practitioners should not be held to the pre-pandemic standard until the IRS can operate in the same manner. If I get a letter that I have to respond to within 30 days and I bust my tail to respond in time, why does the service take forever, and I can call and not get an answer — why is it just my problem? Let’s recognize that these are not normal times, and we all need some breaks.”