Menu
Tax Notes logo

AICPA Calls for Blanket Penalty Relief

Posted on July 9, 2020

The IRS should automatically waive failure-to-file and failure-to-pay penalties for the 2019 tax year so that taxpayers won’t inundate the agency with abatement requests, according to the American Institute of CPAs.

Given that nearly all taxpayers affected by the coronavirus qualify for reasonable cause penalty relief, “automatic waiver of penalties for the 2019 tax year, and possibly the 2020 tax year, is appropriate,” the AICPA said in a July 2 letter to Treasury and the IRS.

The group noted that with the July 15 filing and payment deadline looming, many taxpayers and return preparers continue to struggle to calculate and make tax payments and prepare and file tax returns.

“Taxpayers are facing the largest level of unemployment ever seen in the United States since the Great Depression making it difficult for many to afford food or pay their mortgages, much less meet their tax obligations,” the AICPA wrote. “Other taxpayers struggling with fighting the Coronavirus or struggling with effects of quarantine may not have the time, may not have access to data, or are simply overwhelmed and confused to timely file.”

Asking taxpayers to fill out the paperwork needed to request penalty abatement would put additional stress on taxpayers and impose an administrative burden on the IRS to timely approve those requests, according to the AICPA.

“To mitigate the burden on taxpayers and the IRS, the IRS should exercise its authority under reasonable cause and its general authority to allocate enforcement resources and determine compliance priorities to waive these penalties for all taxpayers,” the group said.

The AICPA also suggested that the IRS establish an expedited process to approve new installment agreements or modifications of existing installment agreements, based on realistic and affordable payment arrangements, for taxpayers affected by the coronavirus.

Halt Automatic Collection

The group further recommended that the IRS continue to halt automatic collection activities of liens and levies by at least an additional 90 days after July 15. “At that time, the IRS should reassess the appropriateness of re-establishing any collection activities,” it said.

The AICPA noted that taxpayers will start to receive automatic collection notices for amounts owed, new automatic liens, systemic liens, and systemic levies after July 15, even though the coronavirus will continue to disrupt taxpayers’ lives. The group pointed out that many taxpayers may respond to notices through paper correspondence.

“Currently, the IRS has a backlog of letters that is unmanageable,” the AICPA said, adding that the agency has rented tractor-trailers and separate storage containers to store the mail already received. “It is estimated that it will take the IRS about one and one-half years to sort through the backlog of mail,” the group wrote. “In that time frame, taxpayers could inappropriately receive further collection notices or threatening liens or levies. The IRS must continue to provide taxpayers relief from collections activities.”

Copy RID