Practitioners wary of IRS service expiration at the start of tax season
CPA tax practitioners have greeted the start of tax season with skepticism about the IRS’s ability to cope with its lingering logistical challenges, with taxpayers and their preparers likely to experience further frustration and delays.
Announcing Monday that it would begin accepting and processing 2021 tax returns on Jan. 24, the IRS admitted its taxpayer service was poor, with a backlog of returns from the previous year to process.
While acknowledging that his performance caused frustration among taxpayers, the Service issued an optimistic note for the current season, saying the Jan. 24 date will give it enough time to complete programming and testing in order to “s’ ensure that IRS systems are functioning properly “. And he underscored the role of taxpayers in speeding up processing, doing electronic filing with direct deposit or debit, and ensuring that Child Tax Credit advance payments and Economic Impact Payments (IEPs) ) are correctly reconciled with their corresponding credits for the entire year.
But the IRS needs to do more, said Barry Melancon, CPA, CGMA, president and CEO of AICPA, in a statement.
“Treasury officials have acknowledged that the upcoming 2021 tax filing season will be ‘frustrating’ for Americans, but have refrained from providing any measures they intend to take to alleviate expected challenges.” , said Melancon.
Over the past year and a half, Melancon said, the AICPA has repeatedly urged the IRS, the Treasury, and Congress to provide greater tax penalty relief in light of the COVID-19 pandemic and resulting difficulties for taxpayers. These recommendations “would dramatically reduce persistent, unnecessary and erroneous notifications and help US taxpayers,” Melancon said.
Rather than just “stating the obvious,” Melancon said, the IRS should also:
- Suspend its compliance actions, such as liens and levies, until it can devote sufficient resources to a speedy resolution of the matter;
- Align taxpayer account freeze requests in a timely manner with the time it takes for the Service to process any penalty reduction request;
- Offer taxpayers a simplified abatement process; and
- Offer taxpayers targeted relief from underpayment and late payment tax penalties for the 2020 and 2021 tax years.
These are “all actions the IRS can take at present“said Melançon.
“This tax season could be even worse than the previous two because the IRS is still very late,” said Chris Wittich, CPA, partner of Boyum Barenscheer in Minneapolis. “The IRS has had two very difficult years, but they haven’t handled them well, and they’re falling even further behind, if you ask me.”
“I just have no optimism for tax season,” Wittich said.
An even bigger problem than unprocessed returns – and potentially affecting 2021 returns – is the IRS’s inability to timely process taxpayer responses to IRS notices, Wittich said.
“People responded very quickly, but it takes six, nine, 12, or 15 months for the IRS to open the mail and process a fairly straightforward response,” he said.
Likewise, taxpayer tax penalty reduction requests are not being dealt with in a timely manner in many cases, Wittich said. Then, a progression of subsequent opinions can degenerate into a levy, alarming the taxpayer, while his claim for reasonable cause remains a dead letter.
“I would love to see them not assessing the penalties in the first place, turning off the notification and penalty machine, which they don’t seem willing to do,” he said. “The IRS needs to do some kind of simplified penalty reduction.”
All of this portends greater taxpayer frustration with existing provisions the IRS struggles to administer – and the possibility of even greater angst if Congress passes new ones retroactively to 2021. And the pandemic, d elsewhere, is far from over.
“The pandemic has created enormous challenges for the IRS which realistically can only get worse as the omicron variant is rapidly fueling new infections,” said Edward Karl, CPA, CGMA, vice president of the AICPA – Tax Policy and Advocacy. “If the government continues to operate on an ongoing resolution, which seems likely at this time, it will create an additional layer of complications for the service. dealing with the inevitable COVID infections among IRS staff, will further burden an already stretched agency.
“Now more than ever, the IRS must take action to improve what the Service has already identified as a difficult situation,” Karl said.
– To comment on this article or suggest an idea for another article, contact Paul Bonner at [email protected].