On Wednesday, January 26, 2022, a bi-partisan group of nearly 200 representatives sent a letter to Treasury Secretary, Janet Yellen, requesting relief for taxpayers in light of “unprecedented challenges” being faced by the Internal Revenue Service. The letter highlights the problems faced by small businesses who have followed IRS and Small Business Administration procedures for requesting pandemic-related relief funds noting that “the IRS has 2 million Forms 941 (Employer Quarterly Tax Returns) that must be processed before the nearly 500,000 amended Forms 941 can be processed. In many cases, the delayed processing of amended returns has been devastating to small businesses in our communities whose applications for emergency loans from the Small Business Administration have been caught in limbo nearly two years after the COVID-19 pandemic began.” In many cases amended Forms 941 have been filed as part of the procedure for obtaining the Employee Retention Credit (ERC), which was part of the pandemic relief included in the CARES Act. The ERC was meant as a measure to improve cash flow for businesses struggling due to the effects of the pandemic. Needless to say, a six month wait under such circumstances is too long. Two years is unconscionable.
The Congressional letter follows a similar letter sent to the Treasury Department and the IRS by the Tax Professionals United for Taxpayer Relief coalition on January 14th. The Congressional letter also requests specific measures designed to “bring immediate relief to taxpayers, and reduce the backlog, during this filing season:
- 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.”
Shortly after the representatives sent their letter, the IRS announced relief measures—or, more accurately, half (or quarter) measures. The IRS stated that they would “halt the use of automated notices in cases where a payment has been credited to a taxpayer but no tax return has been processed in a effort to help ease confusion related to a backlog in paper filings.” In its statement the IRS indicated that suspending all notices is impossible because in many circumstances it is statutorily required to send certain notices within a specific timeframe for them to be legally valid. In other words, in many cases the law requires the notices to be sent and only Congressional action can change or suspend the law.
Today the Tax Professionals United for Taxpayer Relief coalition released a statement in response to the IRS comments and the limited relief offered:
“We appreciate that the IRS has halted ‘automated notices in cases where a payment has been credited to a taxpayer, but no return has been processed.’ This is a good first step in offering relief to taxpayers. However, in our experience, the majority of erroneous notices are a result of numerous other circumstances where taxpayers are crying out for help, especially the underserved and minority communities. The IRS should temporarily suspend all automated compliance actions as they did with the onset of the COVID pandemic. Furthermore, we believe that if all the recommendations made by this coalition are implemented, it will go a long way to help taxpayers, tax practitioners and the IRS better navigate through this difficult tax season. Simply put, more is needed to offer meaningful relief to individuals and small businesses, and we urge the IRS to implement all of our recommendations.”
The Tax Professionals United for Taxpayer Relief Coalition comprises the American Institute of CPAs (AICPA), together with Latino Tax Pros, National Association of Black Accountants, Inc. (NABA), National Association of Enrolled Agents (NAEA), National Association of Tax Professionals (NATP), National Conference of CPA Practitioners (NCCPAP), National Society of Accountants (NSA), National Society of Black Certified Public Accountants, Inc. (NSBCPA), National Society of Tax Professionals (NSTP), Padgett Business Services, the Diverse Organization of Firms (DOF), H&R Block and Prosperity Now. This industry coalition is an unprecedented, diverse group of stakeholders from the tax practitioner community including those representing Latinos, African Americans, small businesses and low-income taxpayers. The Coalition was formed in response to current issues with the IRS’ quality of service for taxpayers and tax practitioners and provides recommendations to address these issues. It definitely has its work cut out for it.