For many of us, we’re living in a time that has no comparison. We’ve seen wars, famines, economic crashes, but no pandemic—until now. In an article for Accounting Today magazine, Jim Buttonow says for the Internal Revenue Service, a bad situation may be about to get even worse.
Buttonow sees the IRS in the unenviable position of being in the middle of a perfect storm for a federal agency. In the middle of a busy tax filing season, the IRS still has some 70 million individual tax returns to process, and it’s doing the job with 20,000 fewer workers than it had a decade ago.
But legislative remedies for the economic downturn caused by the coronavirus pandemic have also tasked the IRS with one of the biggest jobs in the country: distributing many of the benefit payments in the stimulus package passed by Congress. The IRS has been tasked with figuring out who gets a payment and then sending out millions of checks and electronic deposits. To cap it all off, there are changes to the Tax Code that were made part of the relief legislation that will have to be implemented in the IRS returns processing systems and other operations.
It’s a daunting to-do list at the very least.
In the short term, the virus is also forcing the IRS to make changes to the way it does business. The agency is trying to restructure operations so that it doesn't require face-to-face contact with taxpayers, all the while attempting to conduct business as usual serving those taxpayers who need assistance.
One of the most urgent tasks is to create the capability for employees at IRS locations across the country to instead work from home. With about 70,000 employees nationwide, Buttonow says it will take the IRS some time to return to normal operations—and might not return to normal until long after the pandemic is declared over.
For taxpayers and tax pros alike, interacting with the IRS during this time will be completely different than we’re used to, Buttonow writes. He’s given us 10 important things to remember about IRS operations and just how to interact with the agency until the situation returns to something akin to normal.
- Use .gov First to Get Answers to Questions
Even during regular income tax filing, the IRS phone system struggles to keep up with demand. Instead, Buttonow writes, use the IRS website to research questions. Many taxpayers are trying to call the IRS help line to get stimulus payment information when the best—and easiest—way to find that information is to check the IRS coronavirus web page.
- Live Assistance is Scarce
Taxpayer Assistance Centers have all been shut down for the foreseeable future and IRS phone lines are likely to be down for a number of weeks as well. Many other IRS hotlines are out of commission, whether for taxpayers or tax pros. Don’t expect any phone support until we get close to the new tax deadline of July 15. The agency has suspended almost all audits and collection activities until then.
- The IRS will be Hard to Reach from Here On
Expect a mountain of backlogged correspondence to face the IRS once the agency opens the gates. Even with its plans for other types of channels for taxpayer communications, such as email or its new e-fax lines, Buttonow says the agency likely will face a mountain of correspondence and clogged telephone lines after normal operations start up again.
- Put That Audit on Hold—Mostly
In its “People First Initiative,” the IRS announced all new audits had been suspended and wouldn’t resume until after July 15. However, Buttonow observes it’s realistic to expect the agency to continue to use audits in the meantime to stop suspicious or erroneous refunds. Any taxpayer with a questionable refund is likely to see the IRS filing filters stop their refunds until the taxpayer can verify the return is legitimate.
- Reprieve on Back Taxes
The IRS has halted collection enforcement activities through July 15. And, as part of the People First Initiative, liens, levies and passport restrictions are also on hold during that time. Proceeding of collection alternatives—including offers in compromise—are similarly suspended. Taxpayers can, however, still go to the IRS website to set up a new monthly payment plan for tax due.
- Monthly Installment Agreement Payment Not Needed—or Is It?
On one hand, the IRS “People First Initiative” said taxpayers aren’t required to make the monthly payment on an established installment agreement from April 1 through July 15. That’s fine for taxpayers who pay by check, but those who use direct debit are caught in the middle. Most banks say, “Hey, can’t stop the draft,” and taxpayers have to call the IRS directly to void a payment during the “free” Buttonow says that means taxpayers are really stuck.
“Taxpayers are in a pickle: IRS phone lines are closed, so taxpayers cannot contact the IRS to “skip” the automatic payments during this time. Also, the IRS is not automatically suspending direct debit payments. The IRS has not provided any guidance on how it will enable taxpayers to initiate a skip on their scheduled drafted payments,” Buttonow writes.
- Use IRS Transcripts to Answer Account-Related Questions
An official transcript from the IRS can help answer questions about AGI, estimated tax payments and more. Taxpayers can access transcripts immediately by setting up an IRS online account and using the “Get Transcript” tool on IRS.gov. They can also call the automated “Get Transcript” line and order a transcript to be delivered to the record on file with the IRS.
- Call Local Taxpayer Advocate Service (TAS) Office if You Have a Hardship
This includes taxpayers who experience a financial hardship due to a hold on a refund. The central TAS hotline is closed but taxpayers can contact a local advocate by phone. Go online for a list of local advocates: https://www.irs.gov/advocate/local-taxpayer-advocate
- File Now if You Can
The IRS is still processing tax returns and most stimulus payments will be figured from filed 2019 returns or from a 2018 return if a ’19 return hasn’t been filed yet. It’s a good time to file the required back tax returns, especially important for those who haven’t filed a 2018 and 2019 return.
- Stimulus Payments Won’t go for Tax Debts
The stimulus legislation says the IRS won’t apply the amount of the stimulus payment against any tax due owed. It can, however, be used for outstanding child support debt.
Buttonow notes that the IRS, while sending out the stimulus checks, is not in charge of deciding how much each taxpayer gets. That’s laid out in the stimulus legislation, and with any lawmaking process, it’s likely that some Americans will fall through the cracks.
Our thanks to Jim Buttonow and our friends at Accounting Today magazine for their article. You can access the full version at AccountingToday.com.