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SuraLinkBy Steven N. Smith, CPA, JD
The 2022 filing season will likely be a frustrating experience for both taxpayers and tax professionals. Individual returns can be submitted to the IRS beginning January 24th, but movement through the system of these returns may continue to be a lengthy process.
The Taxpayer Advocate Service (TAS) is an independent organization within the IRS. The purpose of TAS is to ensure that all taxpayers are treated fairly and that they know and understand their rights. The National Taxpayer Advocate is the head of TAS, is appointed by the Secretary of Treasury, and reports directly to the Commissioner of Internal Revenue. One recurring duty of the National Taxpayer Advocate is to submit an annual report to Congress, that among other things, includes a summary of the ten most serious problems encountered by taxpayers.
The executive summary of the annual report recently submitted to Congress notes the following, which comes as no surprise to anyone who has interacted with the IRS within the last 12 months:
“Calendar year 2021 was surely the most challenging year taxpayers and tax professionals have ever experienced – long processing and refund delays, difficulty reaching the IRS by phone, correspondence that went unprocessed for many months, collection notices issued while taxpayer correspondence was awaiting processing, limited or no information on the Where’s My Refund? tool for delayed returns, and – for full disclosure – difficulty obtaining timely assistance from TAS.”
The report notes that from the perspective of tens of millions of taxpayers, tax administration in 2021 was “horrendous,” referencing as among the lowlights:
- Processing backlogs led to long refund delays,
- Telephone service was the worst it has ever been,
- The IRS took months to process taxpayer responses to its notices, further delaying refunds and, in some cases, leading to premature collections notices, and
- The IRS’ Where’s My Refund? tool often could not answer that question.
In elaborating on the processing delays, the report states that the IRS was behind before the 2021 filing season had even started because it carried over approximately 11.7 million returns from 2020. The IRS did not process virtually all 2019 returns until June 2021. As the IRS is preparing to begin the 2022 filing season, it is carrying over millions of unprocessed returns and millions of pieces of taxpayer correspondence, resulting in even longer delays for taxpayers who have been patiently waiting for far too long.
To add complexity to the situation, when taxpayers file their 2021 tax returns, millions who received Advance Child Tax Credit payments will have to reconcile the monthly advanced payments they received with the amounts for which they are eligible. Similarly, eligible taxpayers who did not receive some or all of the third round of stimulus payments, as authorized by the American Rescue Plan Act, will have to claim them as credits on their returns. Thus, the unprecedented processing and refund delays taxpayers experienced in 2021 could be as bad, and potentially worse, in 2022 if taxpayers do not file electronically or do not properly reconcile their monthly Advance Child Tax Credit payments or the third stimulus payment with their 2021 returns.
The report notes that over the past year, there has been a tendency to focus on the unique challenges posed by the pandemic and to attribute IRS service and technology shortcomings to these circumstances. There is no doubt the pandemic has had a big impact, but taxpayer services and technology at the IRS were inadequate long before the pandemic.
The National Taxpayer Advocate recommends that Congress provide dedicated multiyear funding for IRS hiring, recruitment, and employee training so the IRS can replenish the workforce losses incurred over the past decade and build the workforce of the future to provide the best in class tax administration and quality service. The Build Back Better Act, which has stalled in Congress, included provisions to significantly increase funding to the IRS. While most taxpayers would not support tax increases in general, many might more readily accept increases to support the IRS, achieve better tax administration, and avoid the frustrations of dealing with the IRS that many have experienced in the recent past.
The accounting profession promotes more immediate, short-term relief for taxpayers. For more than a year, the American Institute of CPAs has been requesting that the IRS offer fair, reasonable, and practical penalty relief measures for taxpayers as they deal with ongoing challenges brought on by the COVID-19 pandemic.
The Alabama Society of CPAs is supporting steps to help mitigate the issue by calling on members of the Alabama delegation in Congress to sign and forward to U.S. Treasury Secretary Janet Yellen, a letter that would provide alternative measures to alleviate some of the need to contact the IRS. These suggested measures are as follows:
- Halt automated collections from now until at least 90 days after April 18, 2022;
- Delay the collection process for filers until any active and pending penalty abatement requests have been processed;
- Streamline the reasonable cause penalty abatement process for taxpayers impacted by the COVID-19 pandemic without the need for written correspondence;
- Provide targeted tax penalty relief for taxpayers who paid at least 70 percent of the tax due for the 2020 and 2021 tax year; and
- Expedite processing of amended returns and provide TAS and congressional caseworkers with timely responses.
As you begin to gather your tax documents and prepare your filing information, BMSS is here to serve you and help bring you peace of mind as the 2022 filing season unfolds. If you have any questions regarding tax matters that you encounter during 2022, please do not hesitate to reach out to your BMSS professionals at (833) CPA-BMSS.