The IRS announced that as of June 25, there was a backlog of 16.7 million 2019 and 2020 individual tax returns. The IRS expects to have the 2019 returns processed by the end of the summer.
Taxpayers are receiving mixed messages from the IRS with erroneous notices and confusing letters. Many people who are due refunds from the IRS are receiving a CP14 Notice which states that they have a tax liability. Part of the confusion is being caused by tax changes to unemployment benefits that were made during tax season. The IRS told taxpayers that in most cases they should not amend their tax returns to correct the unemployment issue. However, an amended return would be needed if the taxpayer would qualify for the Earned Income Tax Credit or other key credits, based on a lower taxable income. Unfortunately, the IRS sent automated notices in early July to collect the amount that was shown on the original return, even though taxpayers would be due a refund when the IRS made the corrections.
It’s best not to ignore a letter stating that you owe the IRS even though you know you are due a refund. It may require a call or letter to put a “hold” on further collection activity. You can try to call the IRS a few times until you are able to discuss the matter with an IRS employee. Write the employee’s name and badge number that you talk with and the time and date of the call.
You can also send a letter to the IRS that explains that you are waiting for the IRS to reprocess your tax return and that you are due refund. The letter should be sent by certified mail in case you need to prove that your letter had been mailed.
An additional problem that I have encountered with the IRS is that they are mailing letters to taxpayers requiring the payment of late penalties when the return was not filed late. Their extension had been filed on time by certified mail. After calling the IRS about this matter, I was told that the problem was caused due to the IRS being slow processing mail and the tax return was processed before the extension. The IRS had already corrected the late penalty when I called. However, I was told that the IRS should be called in similar circumstances.
If a tax professional prepared your return and you received an erroneous IRS letter, your tax professional can generally get through to the IRS quickly on the Tax Practitioner Hotline.
The IRS Security Summit partners called on tax professionals to increase efforts to inform clients about the Identity Protection PIN Opt-In Program that can protect against tax-related identity theft. “An Identity Protection PIN prevents someone else from filing a tax return using your Social Security number,” said Chuck Rettig, IRS commissioner. “We’ve now made the IP PIN available to anyone who can verify their identity. This is a free way for taxpayers to protect themselves, but we need the help of tax professionals to make sure more people know about it.”