Congress appears open to putting a freeze on automated notices issued by the IRS, according to National Taxpayer Advocate Erin Collins.
Speaking January 13 at a virtual seminar of the California Society of Enrolled Agents, Collins said the Taxpayer Advocate Service has been trying to persuade the IRS to temporarily stop issuing automated notices amid the processing backlog at the agency. And while the IRS has resisted that recommendation, Collins said, congressional lawmakers seem increasingly receptive to it because they’re hearing from their constituents about the challenges they’ve encountered with the IRS.
Collins said she received a lot of questions about a potential notice freeze during her visit to Capitol Hill following the release of her annual report to Congress January 12.
TAS has been recommending a six-month hold for collection notices, because “nine weeks and the current situation isn’t doing any good,” Collins said, referencing the standard hold period granted to practitioners who get an IRS collections representative on the line.
Once the automated notices are issued, they’ll keep coming regardless of whether the taxpayer has a legitimate explanation for why the rationale presented in the notices is wrong, Collins added.
Backlog Pains
The release of the annual report prompted alarm among lawmakers and a request for substantial emergency funding for the IRS. The legislators expressed concern about budget shortfalls at the agency and its backlog of more than 35 million unprocessed returns heading into the coming filing season.
Collins said at the seminar that staff shortages at both TAS and the IRS are impeding communication and the ability to get cases resolved. “So not only do we have a high influx of incoming cases, we can’t close out our cases on the back end,” she said.
TAS will likely begin accepting cases involving 2019 amended returns filed before December 31, 2020, but not any 2020 amended returns, Collins said. She added that she expects the IRS to announce some solutions to the amended return processing backlog soon.
Collins had announced in November 2021 that TAS wouldn’t accept cases based solely on processing delays until the IRS cleared its backlog of amended tax returns. According to Collins’s annual report, that backlog was at 2.4 million returns as of mid-December.
Of the returns filed in March and April of 2021 that have been amended, Collins speculated that a large portion recognized tax on unemployment compensation that was subsequently excluded by the American Rescue Plan Act (P.L. 117-2). That law, passed during last year’s filing season, made the first $10,200 of unemployment benefits received by taxpayers in 2020 tax free, meaning that any returns that recognized tax on that income should be disallowed.