The Internal Revenue Service is dealing with a massive backlog of incomplete tax returns from the previous year, which has caused more tax-time worry than anybody could have imagined for many taxpayers in the process.
National Taxpayer Advocate Erin Collins noted in her 2021 report to Congress that “Paper is the IRS’s Kryptonite, and the agency is still buried in it.”
2021, according to her, will be “the most onerous year taxpayers and tax experts have ever encountered.”
This tax season seems to be on track to break that mark, as tax professionals brace themselves for prolonged uncertainty, ignored calls at the IRS, and more tax refund holds.
In a recent interview with the National Society of Tax Professionals, Nina Tross expressed her frustration with customers weeping over the phone and pleading for money, stating, “I need this money, I need this money.”
Her advice: “I would propose that you take it easy with your customers and avoid adding to their stress level.”
Taxpayers, notably small company owners, often inquire about the status of their refunds, but many are unable to get straightforward replies.
According to the experts, tax experts said that throughout the pandemic’s first two years, many people have inquired about the status of their previous year’s tax return, which the IRS has not yet completed.
To prepare tax returns, Cross recommended tax professionals and others to establish realistic expectations with clients, attempt to calm them down, read IRS warnings, and stay on top of the latest tax group alerts and updates. Cross spoke at a virtual seminar for tax professionals and others on Tuesday.
On several occasions, she said that people are unaware that the surprise letter the IRS has just given them may not be true or may not be comprehensive. The system often creates notifications on a pre-defined basis that the program has decided.
“I’ve had people phone me and say, ‘I’m going to lose my home,'” says the realtor. Tross expressed himself. She clarified that they were not in danger of losing their home, but she was unsure what had caused such a high degree of concern. She inquires calmly: “What IRS letter did you receive?” she inquires.
There is excellent cause for people to feel agitated and outraged. Millions of 2020 tax returns have not been completed, which might cause problems for those attempting to submit their 2021 tax returns.
The Internal Revenue Service is currently negotiating a backlog of 6 million unprocessed original Form 1040 individual returns and 2.3 million unprocessed amended personal returns, also known as Forms 1040-X.
One IRS guidance for the upcoming 2021 tax season, for example, addresses a specific issue that can arise as a result of those unprocessed returns.
When you submit your 2020 tax return but haven’t yet gotten your refund since the return hasn’t been completed, what should you do in this situation, for example? Should you hold off on filing your federal income tax return for 2021 until the IRS pipeline for 2020 has been cleared?
According to the IRS, you do not need to wait until your 2020 tax return has been completed before submitting your 2021 tax return. However, if you want to file online, as the IRS suggests, you will need to take some additional procedures.
In a statement, the IRS warned that “this is a significant point for people who file electronically in this category.” When filing online, taxpayers must have their most recent Adjusted Gross Income, sometimes known as AGI, from their most recent tax return.
Remember to write $0 (zero dollars) for last year’s AGI on the 2021 tax return if you’re waiting for your 2020 tax return to be finalized before filing your 2021 tax return.
According to the IRS, there are certain exceptions, including those who utilized the Non-Filers tool in 2021 to register for an advance Child Tax Credit payment or third Economic Impact Payment in 2021 and entered $1 as their previous year AGI.
Those who got their 2020 income tax refunds, on the other hand, may continue to file and utilize their AGI as they usually would. Example: You would look at a copy of your 2020 tax return and locate your real adjusted gross income (AGI) on line 11 of Form 1040, which is your actual adjusted gross income.
When will the IRS be willing to help taxpayers?
An event hosted by organizations representing certified public accountants, enrolled agents, and other tax professionals on Tuesday, less than two weeks after the Internal Revenue Service officially began processing federal income tax returns for the year 2021, demonstrated the depth of the frustration that tax professionals have been experiencing this season.
The title of the discussion was revealing: “Is the Internal Revenue Service (IRS) preparing to assist you this filing season?” Many individuals are aware that they cannot reach the IRS by phone, but tax experts also reported that they could not get a fast answer.
“It’s the equivalent of dialing up the cable provider. There is no one picking up the phone, “Rebecca Thompson, vice president of strategic alliances and network development for Prosperity Now, a group that has battled to overhaul the United States tax system, explained the organization’s position.
When low-income taxpayers get letters from the Internal Revenue Service, says Thompson, who serves on the IRS Advisory Council, they are particularly unhappy. It is especially true if the message is an automated reminder that incorrectly refers to an already paid tax obligation.
Individual taxpayers will not acquire answers simply by contacting the IRS and asking what the notification is about or attempting to correct a mistake as promptly as possible.
Tax experts, on the other hand, are not getting through swiftly.
Tax professionals who participated in this forum call were advised to wait an hour or two for the Internal Revenue Service to reply to their calls and have all necessary documents ready to go once an IRS employee picks up the phone to speak with them.
During the chat portion of the forum, Carlos Lopez, an enrolled agent and founder and CEO of the Latino Tax Professional Association, stated that the stress of tax season was already evident in the comments. He encouraged tax preparers to eat healthfully and take walks throughout the day to relieve stress.
According to the tax professionals, the IRS phone system becomes congested when customers get automated alerts and documentation that surprises them. They insisted that no firm could manage 1,500 calls per second without crashing.
Commissioner Charles Rettig of the Internal Revenue Service revealed in written evidence before a Senate panel last year that the IRS received 8.6 million calls on March 15, 2021, alone, an average of around 1,500 calls per second.
During a more regular filing season, he predicted that the IRS would get between 2 million and 3 million calls each day on average.
According to tax professionals who deal with taxpayers daily, backlogs increased paperwork, an increase in phone calls, and an increase in irritation.
According to a study by the National Taxpayer Advocate, almost 5 million pieces of taxpayer communication remained in the backlog as of late December, with some dated as far back as April 2021 and many taxpayers still waiting for their refunds nine months after filing their tax returns.
The Tax Professionals United for Taxpayer Relief Coalition addressed a letter to the Internal Revenue Service in January suggesting initiatives that may be made to alleviate the concerns shortly.
The experts claim they have been attempting to get relief for around 18 months, while pandemic-related difficulties became worse for the Internal Revenue Service.
The American Institute of CPAs, the Latino Tax Professional Association, the National Association of Black Accountants Inc., the National Association of Enrolled Agents, the National Association of Tax Professionals, H&R Block, and Prosperity Now are among the organizations that have joined forces to form the coalition.
ACCORDING TO THE LETTER SENT TO THEM, the IRS, taxpayers, and tax experts have all experienced “unexpected and long-lasting challenges” due to the epidemic.
The tax season will not be easy, and no one is aware that it will be.
The letter cited the extraordinary amount of unprocessed returns compared to the years before the epidemic as evidence supporting the need for more assistance.
“As a result, the IRS issues a large number of notifications, liens, and levies that are not properly targeted. Additionally, the IRS only responds 9 percent of all calls and just 3 percent of calls about individual income tax returns, which prohibits people from addressing their immediate problems with the government “It is important to bring forward difficulties.”
The IRS reacts to confusion.
Several weeks after tax season, the IRS sparked even more controversy when it started sending letters to individuals regarding 2020 returns that they had already submitted years before.
When I published a piece in late January about how the Internal Revenue Service (IRS) distributed letters requesting individuals to submit copies of their 2020 income tax returns — the same forms they filed a year ago — I received several responses from taxpayers.
The letter, which is Notice CP80, has the following information: “Send your completed and signed return to the address shown above. When we get the credit, we will apply it to the tax you owe and refund any overpayments provided you have no other tax or commitment responsibilities.”
The IRS had already cashed their cheques for the taxes they owed the previous year, so many of these taxpayers were perplexed as to why they were required to submit a return. They were well aware that they were not due any money and were not owed any money anymore.
The Internal Revenue Service (IRS) said that it would “stop notifications in circumstances where we have credited individuals for payments but have no record of the tax return being submitted” shortly after taxpayers and others expressed their dissatisfaction.
The tax experts who participated in that conference call expressed a desire to have more of these automated letters halted while the IRS deals with the present backlog of files it is dealing with.
Of course, many individuals who had already received such letters were perplexed about what to do next.
In the words of Luis Garcia, a spokeswoman for the Internal Revenue Service in Detroit, “If a taxpayer has gotten a notification for an upcoming 2020 return, they should not refile.”
Additionally, he said that people might create and log into their tax accounts online at IRS.gov to see their tax status and read any IRS communication.
Those who missed the deadline for filing their 2019 returns may have money that they believe they are entitled to due to the CP80 notification and would want the opportunity to make a refund claim.
The CP80 notification is primarily intended to assist individuals who failed to complete a 2020 tax return due to a traumatic incident, such as a death or natural catastrophe.
According to Edward Karl, vice president of tax policy and advocacy for the American Institute of CPAs, by submitting a return later, they will still be able to collect any refund money that they are entitled to.
An initial return seeking a refund must be submitted with the Internal Revenue Service within three years after the return’s original due date for the IRS to provide a refund.
The Internal Revenue Service stated late Wednesday afternoon that it will temporarily stop more than a dozen other automated warnings, including balance due letters and notices of unfiled tax returns, until further notice.
Also on hold is the sending of automated collection notifications, typically sent when a person owes more tax and which the IRS has temporarily suspended. The Internal Revenue Service (IRS) has no taxpayer submitting a tax return record.
The Internal Revenue Service will continue to evaluate its backlog inventory of prior-year returns to decide when to distribute the letters to taxpayers.
However, the IRS has cautioned that certain people and tax professionals may still get similar warnings over several weeks, depending on their circumstances.
“In most cases, there is no need to contact or reply to the letter since the IRS is continuing to process prior-year tax returns as swiftly as possible,” the IRS said in its statement.
The IRS is misrepresenting its staffing.
Finally, the Internal Revenue Service said on February 3 that it is reassigning 1,200 current personnel from other roles to cope with the record backlog of paperwork. The personnel has past work experience as tax examiners, customer service representatives, campus support representatives, and other important roles.
They will stay on board until the end of September to resolve account management difficulties.
The IRS said that it continues to investigate various methods for assisting taxpayers, including those who have tax returns pending processing.
The American Institute of CPAs applauded the IRS’s decision to halt the one automated notice and its attempts to relocate humans to service centers but said that more needed to be done to improve the situation.
President and CEO of the American Institute of Certified Public Accountants, Barry Melancon, stated in a statement, “We are encouraged that the Internal Revenue Service seems to be listening to and reacting to the collective grievances of all taxpayers.”
According to him, tax professionals, however, want the IRS to do more to give immediate assistance and “act as swiftly as possible to provide fair amounts of relief as we are already at the start of a hectic tax season.” “Time is of the essence,” Melancon said emphatically.
This year, the tax filing date is April 18. Yes, we’re still two months out from the event. Many tax professionals, on the other hand, remain on high alert.