Tax Time and the IRS: In a Nutshell
Many people are likely to feel panicked during tax time this year, and the IRS is trying to reduce this panic by offering some helpful tips. This is Tax Time and the IRS in a nutshell so everyone knows where the IRS stand and how they can plan accordingly for their taxes.
Axed Notice
The IRS announced last week that it would not be sending out automated warnings to filers whose taxes are overdue, as the agency continues to struggle with a backlog of about 6 million unprocessed individual returns.
“In many situations, the tax return may be part of our current paper tax inventory and simply hasn’t been processed,” said an IRS spokesperson in a statement. “Stopping these letters — which could have been sent to thousands of taxpayers — will help avoid confusion.”
It will also avoid angst, Charlotte Crane, a law professor at Northwestern University, added. “Ordinarily, the IRS has computers set to send notices to taxpayers warning them when a tax return is overdue,” she said in an email. “But right now, there’s a big backlog of taxpayers’ returns that have been filed but have not yet been processed.”
Crane says that many taxpayers who have filed their returns are actually in good standing with the IRS because they have made payments through withholding, estimated tax payments or by paying the taxes due when they file their return, even though their returns haven’t been fully processed.
Instead of sending an alarming automated notice to a taxpayer who has filed a return that has not yet been processed, the IRS has opted to wait to send an alert once the missing return is actually discovered.
Brian Marks, who leads the entrepreneurship and innovation program at the University of New Haven, says, “It’s a prudent move on the IRS’ part.” “With this enormous backlog of unprocessed tax forms as a result of the pandemic, this is a wise approach,” he said. “It helps to minimize the confusion and will help the IRS get on with their main task, which is processing tax forms.”
Left to dry
Due to the IRS not receiving increased funding to help it operate better. The agency is struggling to hire more workers, modernize its computer system, and coupled with pandemic-related constraints, the IRS has been seen to have a hard time processing tax filings in a timely fashion.
The IRS has about a million tax returns to process at the beginning of the filing season, but this year that number is expected to reach six million, according to the agency. “Our employees have worked hard, long hours during the pandemic to assist taxpayers and successfully modify our systems, despite lacking the funding that we need to adequately serve the American people,” IRS Commissioner Chuck Rettig said.
The IRS has stopped sending CP80 notices to taxpayers who have made a payment and appear not to have filed, spokesman Eric L. Smith said.
“Due to processing delays for 2019 and 2020 tax returns, the issuance of CP80 and CP080 (Unfiled Tax Return — Credit on Account) notices has been suspended,” the IRS said . “If you receive a notice for your 2019 return and you filed more than six months ago, please refile the return. If you receive a notice for your 2020 return DO NOT refile.
A lot of IRS centers where paper forms are accepted for processing were forced to close their doors due to Covid. Due to the closure of the IRS Centers, coupled with budget cuts, the IRS has seen its staff count reduced by about 25%.
The Internal Revenue Service was inundated with an increased workload when the federal government introduced programs aimed at helping the country through the pandemic, such as expanded child tax credits and stimulus payments.
As John Koskinen, former IRS commissioner under Presidents Barack Obama and Donald Trump, told The Washington Post recently, “By definition, no matter how much more efficient you are, you can’t lose 25 percent of the workforce and assume you can do the same volume of work.”
The April 18 tax-filing deadline for income earned in 2021 has been set by the Internal Revenue Service. There are no plans to extend that deadline this year, the agency said.
In a nutshell
The IRS has had its work cut out for them for the past year especially when Covid hit and they had to shave their workforce off by 25%. A staggering figure especially when they are expected to continue with the workload they have with a reduced workforce. They are doing some steps to streamline the process by axing a notice that causes confusion to taxpayers. They hope that this move could help them finish their backlog from the previous years.
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