An official website of the U.S. Gov An official website of the U.S. GovThe IRS has the discretion to accept an offer in compromise (OIC) or to release refunds it would otherwise apply against taxpayers’ tax debts through an offset bypass refund (OBR). To help taxpayers experiencing hardships TAS collaborated with the IRS to remove barriers for taxpayers considering the OIC program. Effective November 1, 2021, IRS changed its policy allowing taxpayers to keep their tax refunds once the IRS accepts their OICs and enables certain taxpayers to seek OBRs while their OICs are pending the IRS’s consideration.
On January 30, 2025, a discussion draft of the Taxpayer Assistance and Service Act (“TAS Act”) was released by Senator Mike Crapo, chairman of the Senate Finance Committee, and Senator Ron Wyden, the Committee’s ranking member. The TAS Act is a broad and sweeping bill aimed at improving tax administration. Of the 68 provisions, about 40 of them reflect legislative recommendations that I’ve made in my current and past Annual Reports to Congress and Purple Books.
In recent blogs, I’ve highlighted many of the TAS Act provisions that, if enacted, will make great improvements in tax administration and help protect and strengthen taxpayer rights. This blog highlights Section 903 of the draft TAS Act, which will make estimated tax payments for individuals due 15 days after the end of each calendar quarter. Currently, these “quarterly” payments are due at three-month, two-month, three-month, and four-month intervals, which is confusing. This commonsense proposal, by imposing the due dates at even intervals, will simplify the requirement and ease the burden for small business owners and the self-employed, including gig workers.
Tax year (TY) 2025 marks the 50th anniversary of the Earned Income Tax Credit (EITC). The Tax Reduction Act of 1975 introduced the EITC as a modest tax break to provide financial help to economically challenged working families. Over the years, the EITC has grown into the federal government’s largest refundable tax credit program for low to moderate-income workers.
I previously described the dizzying tax compliance challenges encountered by U.S. citizens and residents living abroad. Now, I will describe the basics of filing and paying U.S. taxes for U.S. citizens and residents living abroad.
Individual taxpayers can call the IRS phone line at 1-800-829-1040 from 7 a.m. to 7 p.m. local time Monday through Friday for telephone assistance.
Each year, millions of working taxpayers miss out on valuable tax credits Congress created to support work, offset payroll taxes, reduce poverty, and strengthen families. These credits go unclaimed not because taxpayers are at fault, but because the rules are complex, awareness is limited, and access to reliable help varies.
That’s why, for the 20th year in a row, the Taxpayer Advocate Service (TAS) and the IRS are participating in Earned Income Tax Credit (EITC) Awareness Day on January 23. The day is intended to increase understanding of refundable credits and help ensure eligible taxpayers are aware of their ability to claim benefits provided under current law.
Last week, I submitted to Congress the National Taxpayer Advocate’s 2022 Annual Report and the sixth edition of the National Taxpayer Advocate’s Purple Book, which presents legislative recommendations designed to strengthen taxpayer rights and improve tax administration for all taxpayers.
Although extended unemployment benefits, eviction moratoriums, stimulus payments, small business loans, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Consolidated Appropriations Act, 2021, and other government programs may have stemmed the tide of anticipated COVID-related bankruptcy filings, seeking bankruptcy relief may still be the most appropriate option for some taxpayers experiencing financial difficulties in the wake of the COVID pandemic.
Sometimes taxpayers may need or want to make a change after they have already timely filed their tax return with the IRS. This is not an unusual occurrence and there are a variety of reasons that can give rise to this situation. Individual or business taxpayers may experience a change in circumstances, may receive relevant information late, or may discover something was missed on their original filing. Rarely does the law provide taxpayers with opportunities for what basically amounts to a tax filing do-over of sorts. Depending on the timing and circumstances, taxpayers may have the remedy to file a superseding return. Read on to learn more before you timely file a corrective or revised return with the IRS.
Letter 3219, Notice of Deficiency (also referred to as 90-Day Letter or the taxpayer’s ticket to the Tax Court), is a taxpayer’s legal notice that the IRS is proposing a deficiency.
The Earned Income Tax Credit (EITC) is a refundable credit for low- and moderate-income working individuals and families based on their earned income. EITC significantly reduces poverty, with children constituting over half of the individuals it lifts out of poverty. The amount of the credit increases as earnings increase, reaches a plateau, and then falls as earnings increase. As of December 2021, 25 million workers and families got about $60 billion in EITC benefits. The average amount of EITC received nationwide was about $2,411. Congress provided this credit for individuals and families to be able to afford their day-to-day living expenses. Claiming EITC can be complicated and may involve filing an additional tax form, which leads to errors of both over and underpayment. As I’ve noted in recent blogs (here and here), the American Rescue Plan Act of 2021 (ARPA) temporarily increased the amount of EITC available to eligible taxpayers and expanded the pool of eligible taxpayers. The IRS recently published frequently asked questions about the tax year 2021 EITC.
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:
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.
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.
