The IRS chief appeared to drive a final nail into the coffin of tax practitioners’ hopes for blanket relief from late-filing and payment penalties levied during the pandemic months.
“It is not going to happen,” IRS Commissioner Charles Rettig told an American Institute of CPAs online conference November 17. “We’ve come to the conclusion that there are a series of relief procedures that you should focus on,” he said, including reasonable cause and first-time penalty abatements. The IRS will continue to judge penalty relief requests case by case, he said.
Rettig’s statement was a direct hit to the AICPA’s efforts — stretching back as far as July — to get penalty relief for taxpayers and practitioners who claimed that the coronavirus pandemic interfered with their ability to timely file returns or make payments before various IRS deadlines.
“I’m not understanding this,” the AICPA’s chief tax officer, Edward Karl, told Tax Notes about Rettig’s statement.
The CPA group sent a letter November 5 to the commissioner and to Treasury Assistant Secretary for Tax Policy David Kautter requesting an “expedited and streamlined reasonable cause penalty abatement process” for taxpayers affected by the pandemic.
“The inconvenience for the taxpayer lies in having to either address on their own, or pay a CPA to handle, an issue that was not due to them,” said Stephen Mankowski, co-chair of the National Conference of CPA Practitioners’ National Tax Policy Committee.
Many erroneous penalty assessments this past year were made because of IRS system interruptions during the pandemic, Mankowski said. “For the IRS to now penalize the taxpayers who did what they were supposed to do, rather than allow for their own systems to work, is a disappointment,” he said.
‘If You Were Sitting in My Chair’
“This is not a typical year,” Karl said. “Frankly, this is not the year where I would be concerned about being a little too generous to the many taxpayers who are suffering the effects of COVID-19 . . . and the tax practitioners . . . who are trying to make everything work.”
Karl said the AICPA would still like the IRS to establish a penalty-abatement phone line, with trained assistants to guide taxpayers and practitioners through an expedited relief process.
“We’re sensitive to IRS concerns about relief to the undeserving,” Karl said. “But we’re afraid there are those who are needy . . . who are getting lost in the dust, including practitioners who have had an unprecedented year of trying to help the tax system.”
Rettig noted that tax professionals can still make case-by-case penalty appeals. The IRS offered to correct failure-to-deposit penalties on some employers’ tax credits, and extended bad-check penalty relief because of the pandemic-related mail backlog.
“We provided as much [penalty] relief as we could,” Rettig said.
Karl protested that first-time abatements are available to taxpayers only once every three years. “This frankly seems like the year when you’d want to have a first-time abatement” for millions of taxpayers discombobulated by the pandemic, he said.
Mankowski said, “The IRS has been working to project an image of being kinder and gentler. This statement from the commissioner yields that image to be nothing more than window dressing.”
The National Conference of CPA Practitioners might send a letter asking Rettig to reconsider his penalty-relief opposition, Mankowski said.
Rettig seemed determined to stick to his position. “We’re not willing to provide blanket relief that might assist people who might not have tried to pay attention to their responsibilities, as a practitioner or a taxpayer,” he told the AIPCA conference. “If you were sitting in my chair . . . you would be able to look at it as we do.”