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Mail Backlog Dominates IRS Exam, Collection, Correspondence

Posted on Oct. 5, 2020

The IRS will offer abatements of some failure-to-file penalties while it continues to deal with the mail backlog caused by the coronavirus shutdown that has hampered examination, collection, and taxpayer service.

Around 5 million pieces of mail remain stored at various IRS processing facilities around the country, about half of which involve tax returns, Laura Baek, executive director (intake and technical support) at the Taxpayer Advocate Service, said October 2 during an American Bar Association Section of Taxation virtual meeting.

It’s an improvement from the estimated 11 million pieces of mail piled up in tractor-trailers, post offices, and IRS facilities early in the summer, but it’s an ongoing recovery during a continuing crisis. “The IRS is doing the best they can under the circumstances,” Baek said.

Mail that the IRS stopped opening in March included taxpayer correspondence, paper-filed returns, paper checks, tax forms, and other paper-based communications. “You name it, it was piled up for weeks at the IRS,” Baek said.

‘Systemic Abatements’

“The IRS is aware . . . that there are still a lot of checks, a lot of returns, a lot of correspondence that are in the mail, waiting to be processed,” Baek said.

The agency is offering “systemic abatements” of some failure-to-file penalties, Baek said. Paper-filed extension requests on returns that were later e-filed may not yet have been processed, generating a failure-to-file penalty, she noted.

“Once the paper-filed extension is processed, the IRS should systemically abate the late-filing penalty,” Baek said, adding that she isn’t sure whether the IRS would send the taxpayer a record by mail.

Also, late-payment penalties on paper checks mailed by the extended July 15 return filing deadline should be abated once the IRS is caught up, Baek said.

Answer Exam Notices

The mail backlog means “correspondence examinations are very limited” for the duration of the pandemic, Baek said.

“That’s really the main priority for exam, to work through the mail backlog before doing anything else,” Baek said.

Automated enforcement actions such as the federal payment levy program and automated collection system systemic levies will remain idle until mail backlogs are reduced, Baek said.

The IRS is still advising taxpayers to respond to all exam notices, even if only to explain that they’re having difficulty complying, Baek noted.

Long Way Back

More than half of the IRS’s workforce is still working remotely because of the pandemic, according to Baek.

One of the IRS’s biggest initial service problems was a lack of laptop computers, but Baek said the agency has since mailed thousands of laptops to employees, enabling them to answer calls from home.

Despite all the progress made by the IRS, taxpayers and practitioners should still expect long wait times because of limited staffing, Baek said.

About 60 percent of taxpayer assistance centers — closed starting March 19 — have reopened, Baek said, adding that services there are limited and in-person visits are by appointment only.

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