UPDATED: 26 JAN 2022 07:03 PM EST
More than 200 lawmakers are pushing the IRS to give taxpayers a break on penalties they’re racking up because of mail delays at the agency, just days after the start of a tax filing season that officials warned could be marred by difficulties.
The Senate and House members, from both parties, want the agency to excuse penalties in some cases, delay collections and put fewer limits on taxpayers' ability to claim reasonable cause for relief, they said in a letter to IRS Commissioner Chuck Rettig. The push is being led by Sens. Bob Menendez (D-N.J.) and Bill Cassidy (R-La.) and Rep. Linda Sánchez (D-Calif.).
The problem: IRS processing is being hampered by a backlog of some 15 million pieces of correspondence, including tax returns and documents dealing with taxpayers’ disputes with the IRS. The pileup started in 2020 as the coronavirus pandemic upended tax filing season, IRS staffing and the agency's ability to open, sort and answer all the mail.
The unprocessed forms have in many cases led to automatic penalty notices, liens and more. They have also disrupted loan applications from small businesses, would-be home buyers and college tuition borrowers because tax returns required to qualify for loans aren’t universally available due to the backup at the IRS.
The mountainous paperwork problem has been compounded by underlying troubles plaguing the IRS for years: budget cuts, a shrinking workforce and outdated technology.
“While we recognize no single action will alleviate issues that have resulted from difficulties at the IRS spanning administrations of both political parties, these steps would provide our constituents with greater certainty as we enter this year’s filing season,” wrote the legislators.
They asked Rettig for a series of steps to help alleviate what they called an “alarming” situation. The IRS could do so without congressional approval since no legal action is needed for administrative relief.
IRS spokesperson Jodie Reynolds said the agency is "committed to taking every available option to help taxpayers, including stopping some notices to taxpayers as we surge resources to process backlogged filings. However, the IRS does not have the authority to stop all notices as many are legally required to be issued within a certain timeframe, and it is impossible to suspend them without congressional action."
"We remain committed to working with Congress to explore every option available to provide relief to taxpayers, but these challenges will continue if the IRS continues to operate under severely constrained resources," Reynolds added.
The prescription: The lawmakers' recommendations include halting automated penalty collections from now until at least 90 days after April 18, this year’s filing deadline for most individual income tax returns.
The lawmakers also want the IRS to:
- Delay collection of penalties from people waiting for the agency to process active and pending penalty abatement requests.
- Streamline the process for taxpayers affected by the pandemic to show reasonable cause for penalty abatement, without the need for written correspondence.
- Lift penalties for taxpayers who paid at least 70 percent of taxes they owed each of the past two years.
- Speed up processing of amended returns.
- More quickly answer inquiries from congressional caseworkers and the Taxpayer Advocate Service.
The Taxpayer Advocate Service or TAS, a division of the IRS meant to help filers solve their individual problems, is overloaded with requests and is no longer accepting cases that only deal with processing amended returns. TAS has also stopped taking referrals from congressional district offices, congressional aides have said.“This has made it impossible for frustrated taxpayers to find any help,” the lawmakers wrote. “When our constituents cannot get assistance from the IRS and TAS, they contact us, and we have our hands tied at this point as well.”
A festering problem: Lawmakers, taxpayers and preparers have petitioned the IRS for various forms of penalty relief going back to 2020. Most recently, a coalition of about a dozen tax professional associations delivered the same message to Rettig on behalf of racial and ethnic minority taxpayers, small businesses and low-income taxpayers.
“We ask that the IRS heed the unified voice of our stakeholder coalition and Members of Congress to grant taxpayers relief now,” the coalition said.
The latest tax filing season just started Monday, with concerns mounting about the existing backlog and other worries that could spark taxpayer confusion.
No extension, yet: Rettig and Treasury Department officials have said they have no current plans to extend the filing deadline past April 18, though the IRS has lengthened the past two tax filing seasons due to the pandemic.
Most tax professional groups have yet to call for the IRS to extend the deadline this year, though some are already recommending that if it’s going to happen the IRS should make the announcement sooner rather than later to lessen taxpayer anxiety.
According to recent IRS and TAS updates, the IRS backlog included 6 million original individual returns as of Dec. 31 and 2.3 million amended individual returns as of Jan. 8; 1.1 million unprocessed quarterly business tax returns and about 440,000 amended quarterly business tax returns as of Jan. 19; and nearly 5 million pieces of other taxpayer correspondence as of mid-December.
