During the 2021 filing season, the IRS had to temporarily scale back operations while also assuming new responsibilities in implementing important economic relief measures passed by Congress during the pandemic (i.e., delivering Economic Impact Payments and advance payments of the Child Tax Credit).  Many taxpayers have experienced frustration caused by the high volume of manually processed returns, the limited information available about the status of their return processing, the refund delays, and the difficulty reaching IRS employees.  Many of these challenges are a direct result of the impact the pandemic has had on both the IRS workforce and taxpayers.  To illustrate this impact, between January and August 2021:

• The IRS received an unprecedented high volume of calls (about 199 million);
• Manually reviewed 11 times more tax returns this year (11 million) to correct errors and gather missing information from taxpayers; and
• Had over 1.7 billion visits to gov.

Over the years, the IRS has gotten quite good at processing tax returns and issuing refunds quickly and efficiently. The IRS website says that normal processing time for an electronically filed return is 21 days, but in reality, millions of taxpayers receive their refunds even quicker — sometimes within a week, sometimes in days. Similar to past years, IRS employees are working tirelessly to get taxpayers their much-needed refunds as quickly as possible. However, a combination of the high volume of 2020 tax returns requiring manual processing, the backlog of unprocessed 2019 paper tax returns, congressional mandates to issue economic impact payments (EIPs) and provide other relief to taxpayers during the pandemic, limited resources, and technology issues have contributed to more refund delays and longer refund delays than are typical in a normal filing season.

The IRS has the authority in certain situations to postpone filing deadlines, such as for disaster relief, to provide taxpayers who are dealing with difficult circumstances some much-needed additional time to prepare and file their tax returns. However, these postponements can also create a trap for some taxpayers several years down the road, preventing them from receiving a refund even if they could otherwise file a meritorious, timely claim.  While this trap is known to some, it catches most people off guard.

Bottom line: If you are filing a refund claim you need to be aware of both the filing due date AND the date of your prior payments, which creates a separate, additional deadline for your claim. You must meet BOTH deadlines for the IRS to pay your refund.

The trap arises because filing deadline postponements can cause something known as the “lookback period” to fall out of sync with refund claim filing deadlines. I’ll describe how this happens below but, first, some good news: This trap would be easy to fix through a simple change to the tax code that I believe members of Congress would agree is the right answer.

This notice provides taxpayers with information about their right to challenge proposed IRS adjustments in the United States Tax Court by filing a petition within 90 days of the date on their notice (150 days if the notice is addressed to a person outside the United States).

Today, the IRS released a Strategic Operating Plan (SOP) outlining how it intends to use the nearly $80 billion in additional funding received as part of the Inflation Reduction Act of 2022 (IRA) to improve the taxpayer experience, modernize its information technology (IT) systems, and strengthen tax compliance programs in a fair and equitable manner.

After a federally declared disaster, the IRS can issue relief that gives taxpayers extra time to meet various deadlines. The problem is that the IRS’s disaster relief postponements do not affect all parts of the tax code the same way. Deadlines and dates change for some purposes but not for others. This isn’t always negative, but there are situations when it can cause taxpayers unnecessary confusion and expose them to additional costs and the loss of valid refunds. Section 112 of the TAS Act aims to fix two issues in the tax code that have created unintended consequences for disaster victims. In these circumstances disaster postponements should be treated the same as extensions under the code.

The Employee Retention Credit (ERC) is a complex tax credit for businesses and tax-exempt organizations that kept paying employees during the COVID-19 pandemic when they were shut down due to a government order, had a significant decline in gross receipts, or qualified as a recovery start-up business.

This is Part Three of a blog series on IRS Processing and my recent experience at the IRS’s Kansas City campus, where I had the privilege of working alongside mailroom employees.

This notice explains you have tax and penalties due resulting from either withdrawing less than the required minimum amount from a traditional individual retirement arrangement (IRA) or putting more than the allowed maximum contribution into a tax-sheltered account.

Since the beginning of the COVID-19 pandemic, the IRS has fallen nearly a year behind in processing paper tax returns.  As of March 18, 2022, the paper return backlog stood at nearly 15 million.  Most taxpayers receive refunds, so return processing delays generally mean refund delays.  Refund delays have caused frustration for many and financial hardship for some, potentially including evictions, utility shutoffs, and the inability to afford food and medicines.

In other cases, a taxpayer’s inability to furnish proof of current filing and a tax transcript due to processing delays has adversely affected loan applications, including applications for mortgages, personal or business loans, and even student financial aid.

When I released my annual report in January, I said that paper is the IRS’s Kryptonite and the IRS is buried in it.  The reason paper returns are so challenging is that the IRS still has not implemented technology to machine read them, so each digit on every paper return must be manually keystroked into IRS systems by an employee.

The IRS is redesigning Form W-4, Employee’s Withholding Allowance Certificate. The changes to this form will affect nearly every employee and employer, potentially more than once a year.

An Initial Contact Letter is your notification that your tax return has been selected for an audit (also called an examination). Included in the letter is a listing of the specific items reported on your tax return or that you failed to include on your return that are being questioned by the IRS, with a request that you provide documentation to support the identified items.

The May 17, 2024 deadline is fast approaching for taxpayers who have not yet filed a 2020 tax return to claim a refund of withholdings, estimated taxes or their 2020 Recovery Rebate Credit. The IRS estimates that almost 940,000 of the nation’s taxpayers have unclaimed refunds totaling more than $1 billion for tax year 2020 and encourages eligible non-filers in 2020 to claim their Recovery Rebate Credit before the May 17 deadline.