IRS temporarily halting distressing incorrect taxpaying letters
The IRS announced that it is temporarily stopping some letters and notices to taxpayers. The pandemic has created a backlog of unprocessed tax returns and mail which resulted in people receiving distressing letters in error.
The IRS had 6 million unprocessed individual returns as of December 31. Additionally, 2.3 million amended tax returns remained unprocessed as of January 8.
Many taxpayers who mailed their tax returns with their payment have received a CP-80 notice from the IRS incorrectly claiming their tax return was never received.
The CP-80 is generally sent when the IRS has credited payment of taxes but hasn’t received a tax return for that period.
Due to the backlog, it may be months before the tax return is processed.
The CP-80 Unfiled Tax Return notice states, “We haven’t received your tax return. What you must do immediately? If you’re required to file, please file today. If you’ve already filed, please send a newly-signed copy.”
People are often overly alarmed when they receive letters from the IRS informing them that they haven’t filed their tax returns. I’ve recently heard from readers of my column who have called regarding a CP-80 that incorrectly reported their return had not been filed. Fortunately, I was able to relieve their anxiety about the notice.
Many people who receive incorrect IRS notices can’t get through to the IRS by telephone and don’t know tax professionals that they can contact. Consequently, they remain unnecessarily stressed by the incorrect information.
The incorrect CP-80 notices sent to taxpayers will only result in the IRS receiving more mail. This unwarranted additional mail will increase the IRS backlog and further extend the problem.
The IRS has updated its website to warn people about the CP-80 notice. The section, Understanding Your CP-80 Notice, tells people not to refile their 2020 return if it has already been filed. However, people often don’t go to the IRS website to research their issues. Unfortunately, they may rely on the information from the incorrect CP-80 and send a newly signed copy.
The Tax Professionals United for Taxpayer Relief Coalition, AICPA, and other professional tax organizations have requested that the IRS pause all automated compliance actions and provide relief from underpayment and late payment penalties.
People may receive computer-generated letters and notices for a few weeks. Generally, there is no need to call or respond.
Some additional suspended notices include:
CP-501 Balance Due-1st Notice
CP-503 Balance Due- 2nd Notice
CP-504 Final Balance Due Notice/ 3rd Notice/Intent to Levy
If you believe a notice is accurate and you have a balance due, the IRS will continue to accrue interest and penalties until your payment is received.
If you can’t determine the best course of action, a tax professional should be able to provide a solution.