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SuraLinkBy Dalton Bradshaw, CPA
In our Beyond the Bottom Line Newsletter on January, 26, 2022, we summarized the annual report of the Taxpayer Advocate Service to Congress. The report noted that tax administration in 2021 was horrendous from the perspective of tens of millions of taxpayers. In the immediate aftermath of the Coronavirus pandemic touching American soil, the IRS, like many other businesses, was forced to close offices nationwide.
During this closure period, a plethora of taxpayer communications and tax returns continued to pile up, which created a massive backlog of information that the IRS is still working through nearly two years later. Despite this enormous backlog, the IRS’ automated notice system has continued to generate and issue erroneous tax notices related to returns and communications that have yet to be processed. Since these notices are often related to communications and returns that have already been filed or provided to the IRS, but not processed, frustrations have begun to mount among taxpayers, advisors, and representatives nationwide.
On February 9, 2022, in response to these frustrations, the IRS announced that they will be temporarily suspending several automated notices until the backlog of returns and communications has been addressed. Specifically, the following notices will be temporarily suspended:
| Notice/Letter Number | Title | Description |
| Individual Notices | ||
| CP 80 | Unfiled Tax Return | This notice is generally sent when the IRS credited payments and/or other credits to a taxpayer’s account for the tax period shown on the notice, but the IRS hasn’t received a tax return for that tax period. |
| CP59 and CP759 (Spanish) | Unfiled Tax Return(s) – 1st Notice | IRS sends this notice when there is no record of a prior year return being filed. |
| CP516 and CP616 (Spanish) | Unfiled Tax Return(s) – 2nd Notice | IRS sends this notice when there is no record of a prior year return being filed. |
| CP518 and CP618 (Spanish) | Final Notice – Return Delinquency | This is a final reminder notice when there is no record of a prior year(s) return filed. |
| CP501 | Balance Due – 1st Notice | This notice is a reminder that there is an outstanding balance on a taxpayer’s account. |
| CP503 | Balance Due – 2nd Notice | This notice is the second reminder that a there is an outstanding balance on a taxpayer’s account. |
| CP504 | Final Balance Due Notice – 3rd Notice, Intent to Levy | The IRS sends this notice when a payment has not been received for an unpaid balance. This notice is a Notice of Intent to Levy (Internal Revenue Code Section 6331 (d)). |
| 2802C | Withholding Compliance Letter | This letter is mailed to taxpayers who have been identified as having under-withholding of Federal tax from their wages. This letter provides instructions to the taxpayer on how to properly correct their tax withholding. |
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Business Notices |
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| CP259 and CP959 (Spanish) | Return Delinquency | IRS sends this notice when there is no record of a prior year return being filed. |
| CP518 and CP618 (Spanish) | Final Notice – Return Delinquency | This is a final reminder notice that there is still no record of a prior year tax return(s) being filed. |
While the suspension of these notices does not solve all of the IRS’ issues, it serves as an effort to quell the frustrations of taxpayers while the IRS continues to catch up on the backlog. Following the announcement, IRS Commissioner Chuck Rettig stated that, “Our efforts are not limited to suspension of these additional letters and the possibility of similar actions going forward. We have redeployed and reallocated resources throughout the IRS and have implemented innovative strategies in an ongoing effort to provide a meaningful reduction in our inventories.”
In the week following this announcement, additional efforts were made by the IRS to tackle the backlog of unprocessed returns. On February 17, 2022, in response to criticism from Congressional members, the IRS announced that they would be reallocating additional employees, referred to as the “Surge Team,” to process the backlog. This reallocation is in addition to the 1,200 employees that are already on temporary reassignment for processing the backlog of returns. Additionally, the IRS stated that they have abandoned plans to close a massive processing center in Austin, TX in 2024. This announcement came in response to a watchdog report cautioning that the IRS should maintain the processing capacity of this facility.
Although these efforts do not immediately resolve the growing number of issues within the IRS, they are a step in the right direction. The IRS continues to urge taxpayers who have a filing requirement and have yet to file or pay any tax due, to quickly do so as interest and penalties will continue to accrue. We will continue to monitor developments with the IRS and update you in a timely fashion. If you have any questions regarding tax matters that you encounter, please do not hesitate to contact your BMSS professionals at (833) CPA-BMSS.
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