Unfortunately, we haven't found any magic wands to improve the current situation with unprecedented backlogs at the IRS. However, here are a few tips that might help you finalize outstanding returns from last season and get through this season more efficiently.
This article is the second part in a three-part series based on last week's Forbes webinar featuring Nina E. Olson, the IRS National Taxpayer Advocate from 2001 to 2019 and current Executive Director of the Center for Tax Payer Rights. Part one of this series highlighted Olson's overview of the current situation at the IRS. In the third part of this series, we will look at Olson's recommendations for how the IRS and Congress should make improvements.
Below are some tips to help you help your clients. The first two tips seem like common sense, but have been included because of the ramifications of failing to follow them.
1. Use e-file.
Accounting professionals and tax preparers already understand the importance of e-filing. However, it is more important than ever that e-file be used to reduce the risk of making errors.
2. Avoid errors.
No one tries to make errors, but now it is more important than ever to avoid errors in tax filings. As taxes have become more complex, particularly when considering pandemic-related benefits and credits, the volume of errors managed by the IRS has grown exponentially. For example, the IRS managed fewer than 630,000 math error corrections in calendar year 2020 through July 15th. For the same time period in 2021, there were about 9 million corrections made!
The IRS was originally given what is known as math error authority by Congress for the purpose of correcting simple math errors. Later, this authority was expanded to include clerical errors such as inconsistent entries, omissions of certain information, or information mismatches (such as the example of the transposed digits in a dependent's SSN as given in part one of this series). Remember, when an error is corrected, the IRS also has the authority to adjust the assessed tax.
When math error authority is used, the IRS sends a notice to the taxpayer who then has 60 days from the date the notice was sent to request an abatement of the adjustment. Form 843 Claim for Refund and Request for Abatement is used for many math error resolutions. This form is mailed to the IRS, which not only delays the processing of an individual return but also adds to the massive volume of correspondence moving in and out of the IRS.
3. Find assistance for initial return filing issues.
The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that protects taxpayer rights and helps taxpayers with problems they can't resolve directly with the IRS. The organization also provides tax preparer resources. In the past,
Traditionally, TAS has assisted taxpayers throughout the return lifecycle. That changed last year when the IRS became increasingly unable to provide information about an individual return, meaning that TAS also was unable to get information about that return. For much of the year, TAS was unable to assist taxpayers and actually began declining initial filing cases. Unfortunately, it appears that TAS will again decline many initial filing cases this year.
There are specific types of cases that TAS can help with, even in light of the backlogs. If a taxpayer has received notice of a specific error but is unable to get the error resolved, then TAS will currently assist.
If a client meets the qualifications for TAS assistance, you still can submit a request for assistance from TAS by downloading and completing form 911 and faxing it back to your local TAS office which you can locate here. The best result is that the case will be accepted and the worst result is that TAS will have additional statistics to use to fight for improvements at the IRS.
In addition, taxpayers often contact their congressional representatives to assist with their returns. Congressional offices have direct contacts at TAS and have historically been able to expedite concerns. But this also has changed. Two years ago, there were 11,000 TAS cases created through congressional contacts. Last year, there were 66,000 cases, most of which TAS also declined.
Olson recommends taxpayers request assistance through their congressional representatives even if it might be declined to increase the chance of getting a resolution and to increase pressure on Congress. To contact congressional representatives, locate your representative here. Then, click on contact and "Help with a Federal Agency."
4. Find assistance for amended return filing issues.
During the last tax season, TAS did begin accepting amended return cases. It is anticipated that TAS will continue to take cases for amended returns this year.
5. Respond to IRS notices within the required time.
Failure to respond to IRS notices within the required time causes two issues. First, the taxpayer loses the opportunity to escalate to tax court if that recourse is needed. Second, if the adjustment to the tax return means there is tax due on the return and the reply is made outside of the required time, then the IRS can send the taxpayer to collections. By replying within the required time, the IRS can no longer send the account to collections.
How should taxpayers reply, especially in view of the fact that millions of letters are lingering for 199 days before being processed? First, try to call the IRS. If you are able to get through to an agent, it could be a simple fix. In addition, respond with a certified letter.
Note: If the adjustment made initially by the IRS reduces a refund, the taxpayer can take the partial refund amount indicated by the IRS. If the request for abatement is approved, the taxpayer will receive the rest of the refund
What can be done to improve the situation at the IRS?
Tips to help you and your clients work through IRS issues may be helpful, but solving the root causes is critical. Make sure you are subscribed to The Woodard Report for the third part of this series when we discuss steps that have already been taken as well as other actions that taxpayer advocates suggest the IRS implement immediately implement.