IRS suspends sending automated notices as taxpayers balk

The IRS says it has been taking steps to help taxpayers avoid confusion and provide relief as the coronavirus pandemic rages on.

Among the things the agency says it has done include, where possible, requiring overtime by IRS employees and the agency's intention to stop some notices to taxpayers as they increase resources to process backlogged files.

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"We decided to suspend notices in situations where we have credited taxpayers for payments but have no record of the tax return being filed," the IRS said in a statement. "In many situations, the tax return may be part of our current paper tax inventory and simply hasn't been processed. Stopping these letters — which could have otherwise been sent to thousands of taxpayers — will help avoid confusion."

The moves being made by the IRS are in response to calls by the Tax Professionals United for Taxpayer Relief Coalition and members of the Senate and the House.

The American Institute of CPAs (AICPA) believes this action is a positive first step but believes that more should be and could be done by the IRS, without the need for congressional action, to reduce erroneous automated notices and unnecessary taxpayer contact with the service.

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Twenty-five members of the Senate, led by Bob Menendez, D-N.J., and Bill Cassidy, R-La., and 191 members of the House, led by Linda Sanchez, D-Calif., also expressed their desire to see the IRS adopt the recommendations of the coalition and reduce the strain on both taxpayers and on the agency.

Those recommendations submitted to the IRS are:

1. Discontinue automated compliance actions until the IRS is prepared to devote the necessary resources for a timely resolution – similar recommendation also included in the 2021 National Taxpayer Advocate report
2. Align requests for account holds with the time it takes the IRS to process any penalty abatement requests – similar recommendation also included in the 2021 National Taxpayer Advocate report
3. Offer a reasonable cause penalty waiver, similar to the procedures of first time abate administrative waiver
4. Provide taxpayers with targeted relief from the underpayment and the late payment penalty for the 2020 and 2021 tax year

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"All of the recommendations put forth by the AICPA and the Coalition are actions that we believe the IRS can legally take right now to provide immediate relief to taxpayers – but we would welcome more details from the Commissioner on what he believes the IRS can do and what might require congressional action," said AICPA President and CEO Barry Melancon.