IRS knows some recently issued nonpayment notices are wrong. Now what?
Sunday, August 16, 2020
And the crazy that is COVID-19 tax season 2020 keeps on coming.
The recent buzz on tax social media was/is about Internal Revenue Service balance-due notices that arrived in folks' mailboxes. However, the people who got the notices did file on time and did pay when they filed.
So what gives?
The problem, in most cases, is that the payments were/are stuck in the agency's huge — 10 million pieces — U.S. Postal Service mail backlog.
Since those initial concerns were aired on social media (thank you #TaxTwitter!), things seem to be improving.
Some are reporting that the checks the IRS mistakenly said it didn't receive have cleared.
Even better, the tax agency has acknowledged that the major issue is theirs, not the taxpayers they've been contacting by mail.
So what's next? Right now, that's still officially unclear, but here's a look at what happened and how it should (hopefully, soon) be resolved.
IRS admits it's them, not us: Buried in the updates on the IRS' web page IRS Operations During COVID-19: Mission-critical functions continue, the agency says:
Pending Check Payments and Payment Notices: If a taxpayer mailed a check (either with or without a tax return), it may still be unopened in the backlog of mail the IRS is processing due to COVID-19. Any payments will be posted as the date we received them rather than the date the agency processed them. To avoid penalties and interest, taxpayers should not cancel their checks and should ensure funds continue to be available so the IRS can process them.
To provide fair and equitable treatment, the IRS is providing relief from bad check penalties for dishonored checks the agency received between March 1 and July 15 due to delays in this IRS processing. However, interest and penalties may still apply.
Due to high call volumes, the IRS suggests waiting to contact the agency about any unprocessed paper payments still pending. See www.irs.gov/payments for options to make payments other than by mail.
Those two effective dates, March 1 and July 15 that bookend the period for which the IRS will not impose bad check penalties, share this weekend's By the Numbers honors.
Receipt, not envelope opening date: Speaking of dates, another less-specific IRS mention of that issue caught my eye. It was one of two lines that stood out to me in the agency's online clarification.
The IRS says the posting of those stacked up payments officially will be noted as the date they were received (weeks ago) in the agency's then-closed office, not when they finally were actually, physically opened months later. That's how it should be.
I know we're also talking about U.S. Postal Service issues (tax and otherwise) now, but this again is a good reminder that when you mail anything to the tax collector, get third-party confirmation for your records. It can come in handy in times like this.
Yes, it costs a bit more to add any type of delivery confirmation (I prefer certified mail), but the my piece of mind (and proof or when my tax material was mailed and arrived) is worth the price to me.
Patience requested: The second IRS notation that jumped out at me was where the tax man asks us to chill. In normal tax times, don't ignore an IRS notice is one of the cardinal rules on how to handle any tax correspondence.
This time, however, the IRS' online recommendation is, "Due to high call volumes, the IRS suggests waiting to contact the agency about any unprocessed paper payments still pending."
Easy for Uncle Sam to say! He's still [nominally] in control here.
I know it's frustrating to wait when you know you're right and the other party is wrong. It's especially frustrating when that other party is the federal agency in charge of your tax records that can affect your whole life and which can literally cost you added money by its unilateral decisions.
But in this case, that's about all we realistically can do. The agency is still digging out of its months of coronavirus closures, so some patience is required while this process slowly happens.
If you do have records of when you mailed your returns and payments, get those out and be ready if, when the IRS will talk to you, it's still insistent that you owe. You can use the documentation to set your tax record set straight and argue that any erroneous penalties be set aside.
Do the right thing, IRS: However, such arguing shouldn't even be an issue. With the chaos that is COVID-19 taxes, the IRS needs to be the one taking the lead. Unlike the usual taxpayer-IRS interaction, this time the burden definitely is on the tax agency to do what is right.
Specifically, I totally agree with Jeff Levine, a multitasking CPA/PFS and CFP, ("Stop sending notices, and auto-abate penalties until you're caught up!") and Claudia Hill, an Enrolled Agent and Forbes contributor, ("Taxpayers need more than an apology for the inconvenience this situation has created.") about the IRS responsibility to taxpayers who are freaking out about these notices.
Sending taxpayers notices that they owe tax, interest, and penalties when they timely sent checks that are sitting unopened, in boxes piled high in some storage room, is atrocious.— Jeff "The Buckinghammer" Levine, CPA/PFS, CFP® (@CPAPlanner) August 16, 2020
Stop sending notices, and auto-abate penalties until you're caught up!https://t.co/4AEqjS1Qc0
Here's hoping that the IRS gets caught up soon and that all y'all who received incorrect nonpayment warnings get better follow-up news soon from the agency about its notice errors.
You also might find these items of interest:
- Appealing an IRS decision
- Tax notices: A scary letter from the IRS
- It's time for post-filing tax record keeping
|Coronavirus Caveat & More Information
In 2020, we're all dealing with extraordinary circumstances,
both in our daily lives and when it comes to our taxes.
The COVID-19 pandemic and efforts to reduce its transmission
and protect ourselves and our families means that,
for the most part, we're focusing on just getting through these trying days.
But life as we knew it before the coronavirus will return,
along with our mundane tax matters.
Here's hoping that happens soon!
In the meantime, you can find more on the virus and its effects on our taxes
by clicking Coronavirus (COVID-19) and Taxes.
I received one of these notices. It was dated Nov 2, said I had to pay no later Nov. 30, but I didn't receive it until mid Dec! It said I didn't pay the $3.00 I owed them, and tacked on another 6¢ interest and $3.06 penalty.
However I did pay it electronically just minutes after e filing my taxes, for which I was sent an email saying the IRS had received and accepted my tax return. I also have the receipt for the electronic payment, verified it again, and an IRS payment shows on my credit card transactions, right next to the $2.59 it cost to send them $3.00.
I spoke to the online payment site and they verified it again and they are responding to the IRS to prove I sent payment and said I would get credit for the on time payment and the extra fees would be dismissed. But they said it would take time, so dont worry if I get a second notice in the meantime.
My question is, is the IRS going to withhold the stimulous check or reduce it the tax and extra fees they think I owe?
Posted by: CB | Friday, January 01, 2021 at 01:07 PM