The backlog in processing tax returns has prompted the IRS to suspend sending certain letters and notices to taxpayers and will not require a response from them if they have received such correspondence.
“Some taxpayers and tax professionals may still receive these 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,” the IRS stated in a February 9th press release.
However, this directive does not pertain to all communications from the tax agency.
“[I]f a taxpayer or tax professional believes a notice is accurate, they should act to rectify the situation for the well-being of the taxpayer. For example, the IRS cautions people with a balance due that interest and penalties can continue to accrue,” the IRS stated.
The suspended notices include those for unfiled tax returns, Return Delinquency and Balance Due notices, Withholding Compliance letters, and several business notices.
The IRS press release is here, which lists the suspended documents.
It is not clear when the tax agency will resume sending these communications.
“These automatic notices have been temporarily stopped until the backlog is worked through. The IRS will continue to assess the inventory of prior year returns to determine the appropriate time to resume the notices,” the tax agency stated.
The February press release comes on the heels of an IRS statement from January that said the suspension of certain communications was in the works.
Historic Backlog:
The IRS has a backlog of roughly 24 million unprocessed documents, which is comprised of 17.6 million tax returns and about 5.9 million pieces of taxpayer correspondence/Accounts Management cases (excluding amended tax returns), according to the taxpayer watchdog the National Taxpayer Advocate.
The IRS assembled a 'surge team' of 1,200 agents to tackle the backlog while also processing returns from the current season.
Erin Collins, the National Taxpayer Advocate, recently told the House Ways and Means Oversight Subcommittee that 1,200 would likely be insufficient for shrinking the backlog while processing current returns.
“We have no option to clean up the backlog,” she told the subcommittee, and recommended that the hiring of 1200 new IRS staff would be a “good first step.”
“I do believe we will need more than the 1,200,” she said.
Hiring 80,000 new IRS staff was mentioned during the hearing.
The Senate Finance Committee also examined the crisis confronting the IRS. During its hearing, delaying the tax filing deadline was raised so that the IRS could focus solely on shrinking the backlog.
“I know there is some debate on this issue, but I’ll ask the panel: Should we go ahead and recognize the backlog that is out there and what’s going to be an already difficult filing season… [should we] look at somewhat of a delay in the filings this year,” said Senator Mark Warner (D-Va.), who sits on the committee.
Collins testified before the panel and did not support delaying the deadline.
“I don’t think the IRS needs additional time,” she began. “In fact, I think it would cause more challenges for the IRS because they would have to go in and reprogram everything. It also impacts states. It impacts tax preparers. I personally do not see it as a benefit to taxpayers.”
Collins mentioned that taxpayers can already file for extension if more time is needed, although taxes would still need to be paid by the April 18 deadline.
She also stressed that an increase in electronic filings would save the IRS from future backlogs.
“[P]aper is the IRS’s Kryptonite and…the IRS is still buried in it. There is no doubt that paper processing remains the agency’s biggest challenge, and that will continue throughout 2022,” she said in prepared remarks.
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