IRS tries to reassure pandemic-panicked taxpayers

It’s tax time and the IRS is trying to reduce some of the pandemic-induced panic many people are again likely to be feeling this year.

Still struggling with a backlog of about 6 million unprocessed individual returns going back as far as 2019, the agency announced last week it would suspend sending out automated warnings to filers that their taxes are overdue.

“In many situations, the tax return may be part of our current paper tax inventory and simply hasn’t been processed,” the IRS said in a statement. “Stopping these letters — which could have been sent to thousands of taxpayers — will help avoid confusion.”

It will also avoid angst, Charlotte Crane, a law professor at Northwestern University, added.

“Ordinarily, the IRS has computers set to send notices to taxpayers warning them when a tax return is overdue,” she said in an email. “But right now, there’s a big backlog of taxpayers’ returns that have been filed but have not yet been processed.”

Many of these taxpayers, Crane said, “are actually in good standing with the IRS because they have received credit for paying the taxes shown due on those returns — whether through withholding, estimated payments or on filing the return since those deposits are made before the returns are processed — even though their returns have not been fully processed.”

So, instead of sending “an alarming automated notice to a taxpayer who has filed a return that has not yet been processed,” she said, the agency is opting not to send out an alert “even if the IRS computers think the return is still missing.”

“It’s a prudent move on the IRS’ part,” said Brian Marks, who leads the entrepreneurship and innovation program at the University of New Haven.

“With this enormous backlog of unprocessed tax forms as a result of the pandemic, this is a wise approach,” he said. “It helps to minimize the confusion and will help the IRS get on with their main task, which is processing tax forms.”

Hobbled by the largely Republican refusal under Trump to increase its budgets so it can hire more workers and modernize its computer system, coupled with pandemic-related constraints, the IRS has been struggling for several years to process tax filings in a timely fashion.

Most years, the IRS starts the filing season with about a million returns yet to be processed. This year, it’s six times that amount, according to the agency.

“Our employees have worked hard, long hours during the pandemic to assist taxpayers and successfully modify our systems, despite lacking the funding that we need to adequately serve the American people,” IRS Commissioner Chuck Rettig said. 

This year, the agency has stopped sending out what’s known as CP80 notices to taxpayers “who have made a payment and appear not to have filed,” spokesman Eric L. Smith said. 

“Due to processing delays for 2019 and 2020 tax returns, the issuance of CP80 and CP080 (Unfiled Tax Return — Credit on Account) notices has been suspended,” the IRS said. “If you receive a notice for your 2019 return and you filed more than six months ago, please refile the return. If you receive a notice for your 2020 return DO NOT refile.”

Many in-person IRS centers where paper forms are processed were forced to close because of Covid. And the coronavirus, coupled with budget cuts, resulted in a 25 percent decline in the size of the staff.

Meanwhile, the IRS workload dramatically increased when the federal government put into place programs designed to help the country get through the pandemic, such as the expanded child tax credits and the stimulus payments. 

“By definition, no matter how much more efficient you are, you can’t lose 25 percent of the workforce and assume you can do the same volume of work,” John Koskinen, who served as the IRS commissioner under Presidents Barack Obama and Donald Trump, told The Washington Post. “It’s a problem across the board — information technology, revenue agents, people answering the phones.”

The tax filing deadline for income earned in 2021 is April 18. There are no plans to extend that deadline this year, the agency has said.

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