IRS service issues: What a coalition of tax pros seeks to change

Tax season is well underway, and the AICPA is part of a coalition asking for the IRS to make tax filing go smoother. The coalition has made recommendations to improve IRS service issues, and in this episode those recommendations are detailed by Melanie Lauridsen, the AICPA’s senior manager for Tax Policy & Advocacy.

Also, get a summary of recent news coverage on IRS service challenges and the IRS reversing course on the use of facial recognition.

What you’ll learn from this episode:

• Why the AICPA and other organizations formed the Tax Professionals United for Taxpayer Relief Coalition.
• Some of the ways IRS service issues are affecting taxpayers and their advisers.
• A summary of four recommendations the coalition has made to the IRS.
• News of the IRS statement related to suspending automated notices.
• Recent JofA coverage of an IRS announcement regarding taxpayer use of facial-recognition technology.

Play the episode below or read the edited transcript:

To comment on this episode or to suggest an idea for another episode, contact Neil Amato at Neil.Amato@aicpa-cima.com.

Transcript:                                                            

Neil Amato: This is Neil Amato with the Journal of Accountancy, and you are listening to the JofA podcast. One topic the show has touched on recently is taxpayer-related IRS service issues. Joining me to talk more about those issues and about recommendations for making tax season smoother is Melanie Lauridsen, AICPA senior manager for Tax Policy & Advocacy. The AICPA is part of a coalition of organizations pushing for relief on various tax issues. First, Melanie, tell me a little bit about the coalition and how it came together.

Melanie Lauridsen: Thanks, Neil. I’d love to talk about the coalition. As you know, IRS services, there have been issues for a very long time, and the AICPA has been pushing for some sort of relief for taxpayers and for their advisers. Actually, we’ve been pushing for well over 18 months, and now we’re bordering on almost two years of asking for some sort of relief for taxpayers.

Unfortunately, the IRS has given some relief, but not enough for the taxpayers. It’s not unique to just the AICPA, but it is something that’s happening across the whole country and all the different organizations. The AICPA decided to lead a coalition, and we reached out to all these various other stakeholders that are feeling the same pain. When we asked them to be part of this coalition, there was no hesitancy. It just came together naturally. Everybody wants to see some sort of relief and wants to see some sort of mitigation or resolution to all the problems that taxpayers and their advisers are having.

Amato: The Tax Professionals United for Taxpayer Relief Coalition has made several recommendations. What are some of those?

Lauridsen: Let me start by saying they have made four recommendations, and each and every single one of them is something that the IRS can implement for themselves, but for all taxpayers. The very first one is to discontinue automated compliance actions. Essentially, we’re talking about those erroneous notices that people are getting. People are getting one notice. People are trying to respond to the IRS; they can’t reach or get through to the IRS. All of a sudden, these notices become liens and levies. It starts to escalate when it could’ve been a quick resolution, so discontinuance of the automated collections activities would be really great.

The second recommendation that we have is to align the requests for account holds with the time it takes for the IRS to process any penalty abatement request. What we’re saying here or what we found from our membership is that when someone is actually able to get through, and that’s a whole problem within itself, but when someone is actually able to get through to the IRS, and they make them aware that they’ve asked for some sort of penalty abatement, you can request for an account hold.

And it only is holding the account — we’ve heard things from three weeks, four weeks, maybe up to eight weeks that the IRS will honor an account hold. However, they’re taking 16-plus weeks to resolve it, and so it requires follow-up phone calls, and when we’re in an environment where the IRS is only answering about 3% of the calls, it makes it really difficult to call back to the IRS to one, try to get the issue resolved and two, get a second account hold on the account.

The third recommendation that we have is to offer a reasonable-cause penalty waiver that is similar to the first-time abatement procedures. What we’re saying, and in case you’re not aware, the first-time abatement, a taxpayer for any reason can call the IRS, and if they’ve been in good standing for the last three years, the IRS will grant them a penalty waiver. There doesn’t need to be a lot of justification beside it, but it is a quick phone call to the IRS. Well, and quick is relative. If you can get through to the IRS.

The problem with reasonable cause is, it requires a written letter. When there are millions of letters and processing delays over at the IRS, it just makes it ridiculous to be able to send something in writing when the whole country is hurting because of COVID-19. So, we’re asking for some streamlined, expedited way to get reasonable cause.

There are a couple of things that should be noted. First-time abatement isn’t always offered to people. Not every single type of taxpayer can qualify. Second of all, some people have already used it for some abatement. Then COVID-19, has come along, which we all know everyone’s been impacted by it, then what do they do? They’re stuck in the situation with reasonable cause, so we’re asking for a streamlined process for it.

The final one has to do with offering targeted relief for underpayment-of-estimated-tax penalties and late-payment penalties for the 2021 tax year. Now, to be very clear, none of these recommendations will solve the problems at the IRS. However, they will mitigate the problem.

One of the other things that I hear as well, sometimes the penalties aren’t a big amount. Yeah, I hear you, but the problem is, when you keep trying to call the IRS, even if it’s for a small amount or a large amount, you aren’t getting answered, and there’s millions of people calling in. What we’re trying to do with these recommendations is to lessen the need to reach out to the IRS. In theory, if we’re having to call the IRS less then the IRS will be able to get to people who have other types of problems and get those problems resolved.

Amato: To note for listeners, we are recording on Monday, February 7th. Obviously, news is happening just about every day on this, but so far, what has been the response to some of those recommendations?

Lauridsen: Thank you for noting that things are moving fast. In this area, they are moving fast. The first response to the coalition, and I should say the coalition did have a media briefing, and they’ve also submitted a comment letter, and they’ve had other various conversations. We’ve endorsed congressional letters, too, with similar recommendations. The IRS did provide a response.

The first thing they did was to say that they would stop the CP80 notices. Now, to be very specific, the CP80 notices are for people who filed a previous tax return. They made a payment with it, but they haven’t processed that return, and the IRS credited that account for that money. However, what we’re hearing from our members, the CP80 isn’t the bulk of the majority of the problems with all these erroneous notices and trying to get through to the IRS. So, though we appreciate that, it is a small fraction of the bigger problem.

The IRS also said that they needed statutory authority to stop all collections activities. That’s right if they’re going to stop all collections activities, but our recommendations are not to stop, and to be clear, not to stop permanently. That’s the other piece of it. What the recommendation really is, is to temporarily stop automated collection notices, and that’s the key. It’s for those automated notices. The IRS has also very recently announced that they’re going to reshuffle approximately 1,200 of their employees to try to help tackle the backlog and to try to help with that. Once again, we appreciate that, but there’s a lot of a backlog, and we still need more help.

Amato: Related to that backlog, we have had coverage in the Journal of Accountancy on that and other topics, which obviously are evolving. To close, Melanie, what’s next related to this topic?

Lauridsen: We’re trying to do a lot of things. The coalition did request a meeting with the IRS. We’re still waiting to hear back from them. We do have a discussion forum for all the coalition members, and that will be happening on February 8th. We have heard rumors that the Senate Finance Committee will be having a hearing around mid-February, too. We’ll be paying attention to that and supporting where we can in that hearing. We’re also having other media campaigns, public campaigns trying to further encourage the IRS to take actions and hopefully offer the much-needed relief to taxpayers and their advisers.

Amato: Obviously plenty of moving parts in this. We appreciate you taking time to give us an update, Melanie.

Lauridsen: Thank you, Neil.

Amato: Again, that was Melanie Lauridsen with the AICPA. There is certain to be more news on this topic, which will be covered on journalofaccountancy.com and on this podcast. In fact, there is coverage of the coalition forum she mentioned. Paul Bonner’s article details some of the stories: hours spent on hold trying to reach the IRS, along with erroneous automated notices scaring clients. We will provide a link to that article in this episode’s show notes.

Also, the IRS said Wednesday, after the taping of the conversation, that it would suspend some automated letters it sends out to taxpayers, including collection and balance-due notices.

The IRS earlier announced it had reversed course on plans to require taxpayers to authenticate their identities with a nongovernmental facial-recognition service in order to use certain online services. In November, the IRS said the new account creation and sign-in process would be mandatory starting sometime this summer, but now that plan has been scrapped. The authentication method is already in use for some IRS interactions, and it’s an option for taxpayers creating or using online accounts.

That’s all for this episode. Again, we will have links in the show notes for the articles mentioned. Thanks for listening to the Journal of Accountancy podcast.