Practical insight and analysis on the accounting, audit and tax issues impacting not-for-profit organizations.
About That IRS Notice: Do You Need To Respond?
Posted by Melissa Dunn Feb 18, 2022 3:22:09 PM
BBD has seen many of our nonprofit clients experience an uptick in IRS notices, but, unfortunately, there has been no correlating rise in the IRS’ ability to manage responses.
In fact, calls to the Exempt Organization (EO) helpline often result in an automated response stating that the caller cannot even be placed into the queue to speak with an agent. IRS “employees are attempting to balance a confluence of multiple unprecedented demands – including successfully starting the filing season, working our inventory of unprocessed tax returns as well as looking for additional ways to minimize burden for taxpayers, tax professionals and businesses,” according to IRS Commissioner Chuck Rettig.
“The combination of the pandemic, new tax laws and numerous other factors led to an unprecedented amount of unprocessed tax returns and correspondence remaining in the IRS inventory during 2021,” says Rettig. The IRS estimates that they entered this filing season with several million unprocessed original and amended returns. This backlog has exacerbated the problems as the IRS has a number of automated notices, including balance due notices and unfiled tax return notices, which are being sent to taxpayers.
Thankfully, the IRS has announced changes that should help alleviate some of the angst in the short term. On February 9, the IRS suspended more than a dozen additional letters, including the mailing of automated collection notices normally issued when a taxpayer owes additional tax, and the IRS has no record of a taxpayer filing a tax return. While the IRS does not have the authority to stop all notices as many are legally required to be issued within a certain timeframe, these automatic notices have been temporarily stopped until the backlog is worked through.
“Our efforts are not limited to suspension of these additional letters and possibility of similar actions going forward. We have redeployed and reallocated resources throughout the IRS and have implemented innovative strategies in an ongoing effort to provide a meaningful reduction in our inventories,” Rettig said. To that effect, on February 14, the IRS launched a special new page on IRS.gov to provide the latest details and information impacting the 2022 filing season and ongoing efforts by the agency to address the inventory of previously filed tax returns.
This page is intended to provide taxpayers with the latest timely information related to 2021 tax law changes and the ongoing challenges of the pandemic. On it, taxpayers will find a quick overview to assist in filing current tax returns and information regarding previous year tax returns awaiting processing by the IRS. According to Rettig, “This new page provides a one-stop shop for the latest key information people and the tax community may need.”
Still, the IRS notes that some taxpayers may receive notices during the next few weeks. Generally, there is no need to call or respond to the notice as the IRS continues to process prior year tax returns as quickly as possible. However, that does not mean that taxpayers should ignore notices completely. Taxpayers who have yet to meet their filing requirements or pay any taxes due should meet these obligations as soon as possible. Interest and penalties will still accrue as the IRS works through their internal complications and, eventually, notices and assessments will resume.
If your organization has received a notice and is unsure if a response is necessary, we highly recommend reaching out to the tax professionals at BBD to assist. In responding to IRS notices, due diligence is often the key between abated or escalated.