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Archive for National Taxpayer Advocate

Some Of Our Nation’s Most Vulnerable Taxpayers Will Automatically Have Their Accounts Excluded From Assignment To Private Collection Agencies

National Taxpayer Advocate

Background: Since 2018, TAS has been urging the IRS to stop assigning to private collection agencies (PCAs) the accounts of taxpayers who receive Supplemental Security Income (SSI) or Social Security Disability Income (SSDI). In 2019, Congress passed the Taxpayer First Act (TFA), which required the IRS to exclude these accounts. Specifically, TFA § 1205(a) amended Internal Revenue Code § 6306(d)(3) to exclude from assignment to PCAs the debts of taxpayers “substantially all of whose income consists of disability insurance benefits under section 223 of the Social Security Act or supplemental security income benefits under title XVI of the Social Security Act.”

The IRS had no trouble systemically excluding the accounts of taxpayers who receive SSDI. SSDI payments are reported to the IRS by the Social Security Administration (SSA) on Form 1099, and the IRS therefore knows the identities of SSDI recipients. But the IRS was not able to systemically exclude the accounts of taxpayers who receive SSI benefits. The SSA does not issue 1099s with respect to SSI recipients, and the SSA took the position that privacy law barred it from sharing the names of SSI recipients with the IRS.

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National Taxpayer Advocate Issues Midyear Report To Congress

Congressional Report - National Taxpayer Advocate

National Taxpayer Advocate Issues Midyear Report To Congress; Expresses Concern About Continued Refund Delays And Poor Taxpayer Service

WASHINGTON — National Taxpayer Advocate Erin M. Collins released her statutorily mandated midyear report to Congress. The report expresses concern about continuing delays in the processing of paper-filed tax returns and the consequent impact on taxpayer refunds. At the end of May, the agency had a backlog of 21.3 million unprocessed paper tax returns, an increase of 1.3 million over the same time last year.

“The IRS has said it is aiming to crush the backlogged inventory this year, and I hope it succeeds,” Collins wrote. “Unfortunately, at this point the backlog is still crushing the IRS, its employees, and most importantly, taxpayers. As such, the agency is continuing to explore additional processing strategies.”

The report points out that the significant majority of individual taxpayers receive refunds. “At the end of the day, a typical taxpayer cares most about receiving his or her refund timely,” Collins wrote. “Particularly for lower income taxpayers who receive Earned Income Tax Credit benefits, tax refunds may constitute a significant percentage of their household income for the year. Thus, these processing delays are creating unprecedented financial difficulties for millions of taxpayers and outright hardships for many.”

Among business taxpayers, many have been waiting extended periods to receive Employee Tax Retention Credits for which they are eligible, in addition to their regular refunds.

Key taxpayer challenges this year have included return processing delays, correspondence processing delays, and difficulty reaching the IRS by phone.

Backlog of Unprocessed Paper Tax Returns

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National Taxpayer Advocate: Why Do I Owe A Penalty And Interest And What Can I Do About It?

National Taxpayer Advocate: Why Do I Owe A Penalty And Interest And What Can I Do About It?

There are many reasons why the IRS may charge penalties on your tax account. The IRS is legally required, under IRC § 6601(a), to charge interest when you fail to pay the full amount you owe on time. Interest may also accrue on penalties. Interest, and any applicable penalties, will continue to accrue until you pay your balance due in full. Here are some of the most common penalties, information on why they may have been charged, and how to request penalty abatement (removal) if applicable.

First let’s talk about some common penalty charges on individual accounts, along with interest, and why the IRS charges them.

Common penalties include:

  • Failure to file – you didn’t file your tax return by the return due date or extended due date if an extension to file is requested and approved.
  • Failure to pay – you didn’t pay the taxes reported on your tax return in full by the due date of the original tax return. An extension to file doesn’t extend the time to pay so you must pay your taxes by the original due date of the tax return even if you have requested an extension of time to file your tax return. In addition, the IRS may charge a failure to pay penalty if the IRS sends a request for payment and you fail to pay on time.
  • Failure to pay proper estimated tax – you didn’t pay enough taxes due for the year with your quarterly estimated tax payments, or through withholding, when required.
  • Bad check – your bank doesn’t honor your check or other form of payment.

Interest

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How To Keep Your Personal And Tax Information Safe

National Taxpayer Advocate - Erin Collins

Here are some tips to follow to keep you and your private information safe in various situations.

Staying Safe On Social Media

  • Don’t post or send private or tax related information anywhere on these types of platforms. Even if you have your social media accounts set to a limited audience under privacy settings, if you are using an open wi-fi network, like at the local coffee shop or in a hotel room, your information can be captured as it goes over that connection.
  • Don’t open or respond to direct messages coming from social media platforms. For example, anybody that can see your public profile on Facebook, can generate a direct message to you, even when they are not listed in your ‘friends’ categories. Opening these messages can often then let this sender begin a conversation with you. Fraudsters can use this new access to try to obtain information from you, which they can use to steal your identity.
  • See our TAS Tax Tips: Keep safe on social media at tax time – Don’t post or message tax info article for more information.

Staying Safe While Using Email, Phone Or On A Website

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National Taxpayer Advocate Report: Most Challenging Year Taxpayers And Tax Professionals Have Ever Faced

National Taxpayer Advocate Report

Issue Number:    IR-2022-11

Inside This Issue

National Taxpayer Advocate delivers Annual Report to Congress; focuses on taxpayer impact of processing and refund delays

WASHINGTON — National Taxpayer Advocate Erin M. Collins released her 2021 Annual Report to Congress, calling calendar year 2021 “the most challenging year taxpayers and tax professionals have ever experienced.” The report says tens of millions of taxpayers experienced delays in the processing of their returns, and with 77 percent of individual taxpayers receiving refunds, “processing delays translated directly into refund delays.”

The report credits the Internal Revenue Service for performing well under difficult circumstances. Since the start of the pandemic, the IRS, in addition to its traditional work, has implemented significant programs enacted by Congress. Among other things, it has issued 478 million stimulus payments (referred to as Economic Impact Payments or “EIPs”) totaling $812 billion and has sent Advance Child Tax Credit (AdvCTC) payments to over 36 million families totaling over $93 billion.

The report says “[t]he imbalance between the IRS’s workload and its resources has never been greater.” Since fiscal year (FY) 2010, the IRS’s workforce has shrunk by 17 percent, while its workload – as measured by the number of individual return filings – has increased by 19 percent. The report reiterates the National Taxpayer Advocate’s longstanding recommendation that Congress provide the IRS with sufficient funding to serve taxpayers well.

Major challenges for taxpayers

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NTA: Most Serious Problems Encountered By Taxpayers

Most Serious Problems Encountered By Taxpayers

IRC § 7803(c)(2)(B)(ii)(III) requires the National Taxpayer Advocate to prepare an Annual Report to Congress that contains a summary of the ten most serious problems encountered by taxpayers each year. For 2020, the National Taxpayer Advocate has identified, analyzed, and offered recommendations to assist the IRS and Congress in resolving ten such problems.

IRS RECRUITMENT, HIRING, AND EMPLOYEE RETENTION: Quality Taxpayer Service and Protection of Taxpayer Rights Are Directly Linked to the IRS’s Need to Improve Its Recruitment, Hiring, and Retention Strategies

Since FY 2010, the IRS workforce has shrunk by approximately 20 percent, about even with the inflation-adjusted reduction in the IRS budget. Inadequate funding combined with weaknesses in hiring and retention strategies have created an insufficient and disproportionately aging workforce, with an estimated 26 percent of IRS employees eligible to retire during FY 2021. The report says insufficient experienced staffing in the IRS’s Human Capital Office and hiring restrictions outside its control have left the IRS ill-equipped to handle the agency’s hiring needs. TAS recommends the IRS hire additional human resource specialists to meet hiring needs, restructure internal hiring processes to reduce cycle times, and renegotiate the hiring process with the National Treasury Employees Union to allow for up to 50 percent of all hiring announcements to be filled externally.

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National Taxpayer Advocate On IRS Math Errors – Part II

ERIN COLLINS - NATIONAL TAXPAYER ADVOCATE

Math Error Notices Aren’t Just Confusing; Millions of Notices Adjusting the Recovery Rebate Credit Also Omitted Critical Information

When the IRS uses its math error authority to correct an error on a taxpayer’s return, the taxpayer, under IRC § 6213(b)(2)(A), has 60 days from the time the notice was sent to dispute the correction and request an automatic abatement. After the abatement is made, the IRS must follow the deficiency procedures to reassess the tax, and it cannot collect the assessed amount during the 60-day period that the taxpayer has to request abatement.

As mentioned in the Math Error Blog: Part I, the IRS omitted the 60-day time period language for requesting abatement from over five million math error notices where the only adjustment was for the Recovery Rebate Credit (RRC). Ironically, neither the CP 11 nor CP 12 notices include the term “math error” or the authority provided by the Code.  So how are taxpayers even supposed to know what they are looking at?

Good news: The IRS is doing the right thing and will be issuing a supplemental notice providing taxpayers additional time, 60 days from the issuance of the new notice, to request an abatement, which includes providing taxpayers the ability to provide information or documentation to support the RRC.  If you received a prior RRC math error notice omitting the 60-day language, keep an eye on your mailbox for the supplemental letter and consider the options listed below.

This revelation of the missing 60-day abatement language raised many questions, but one thing is clear – this omission would have had serious implications for taxpayers and was a significant compromise of their rights, particularly the right to be informed, the right to a fair and just tax system, the right to challenge the IRS’s position and be heard, and the right to pay no more than the correct amount of tax. Specifically, this omission risked taxpayers losing their right to request an abatement, receive a statutory notice of deficiency, and seek judicial review in the U.S. Tax Court, the only pre-payment judicial forum.

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NTA On Math Error Corrections – Part I (Congress Has Given The IRS Authority To Make Changes On Your Tax Return)

National Taxpayer Advocate On Math Error - Part 1

In a previous blog, Lifecycle of a Tax Return, we set out the initial stages of a return’s journey once it’s been filed, including certain detours a return may take as it goes through reviews prior to being posted on IRS systems. One of these detours is a review by the IRS’s Error Resolution System (ERS) where the return is reviewed for possible errors or omissions. This filing season ERS has experienced a significant backlog causing delays in refunds.

To verify the accuracy of the Recovery Rebate Credit (RRC), Earned Income Tax Credit (EITC), Child Tax Credit (CTC) or Additional Child Tax Credit (ACTC), the ERS Unit is manually reviewing all returns where the taxpayer has claimed the RRC or used their 2019 earnings for the purpose of calculating the EITC, CTC, and ACTC. For more details on the backlog in processing returns, see the National Taxpayer Advocate’s 2022 Objectives Report to Congress, Review of the 2021 Filing Season.

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NTA Blog: 2021 Filing Season Bumps In The Road: Part III

NTA Blog: 2021 Filing Season Bumps In The Road: Part III

Despite all its challenges, the IRS processed 136 million individual income tax returns and issued 96 million refunds totaling $270 billion during the 2021 filing season. For those not familiar with IRS jargon, the term “filing season” is a term of art that includes income tax returns filed on or before the due date of the return, without considering returns filed after the due date or before the October 15 extension date. For example, the 2021 filing season consists of mostly tax year 2020 income tax returns filed between February 12, 2021, and the postponed due date of May 17, 2021.

In addition to its traditional work, the IRS was entrusted by Congress to issue three rounds of stimulus payments – over 475 million payments worth $807 billion – and delivered other financial relief programs to mitigate the impact of the pandemic on U.S. families and businesses. The IRS and its employees deserve tremendous credit for what they have accomplished under exceedingly difficult circumstances. The filing season challenges continue to date and, as the Commissioner has acknowledged, there is always room for improvement. This past year and the 2021 filing season conjure up many clichés for taxpayers, tax professionals, the IRS, and its employees – it was a perfect storm, it was the best of times and worst of times, patience is a virtue, with experience comes wisdom and with wisdom comes experience, out of the ashes, and throughout the past year we experienced historic highs and lows.

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National Taxpayer Advocate’s NTA Blog: 2021 Filing Season Bumps in the Road: Part II

National Taxpayer Advocate’s NTA Blog: 2021 Filing Season Bumps in the Road: Part II

The National Taxpayer Advocate Erin M. Collins follows up with Part II of her recently published NTA Blog on filing season challenges and refund delays. In her newest blog, Collins talks about the latest legislation, the new American Rescue Plan Act (ARPA), enacted in the middle of the tax filing season, its benefits to taxpayers and the challenges the IRS faces in executing the provisions of.

The National Taxpayer Advocate draws attention to two specific legislative changes:

  1. Partial Exclusion of Unemployment Compensation Benefits from Income

In most cases, the IRS will automatically recompute any deficiencies or refunds for taxpayers who qualify for the partial exclusion of taxation of unemployment benefits up to $10,200 for each taxpayer if the modified adjusted gross income (AGI) is less than $150,000 and will make the necessary adjustments, eliminating the need for millions of taxpayers to file amended returns. There are certain caveats which apply for taxpayers with qualifying children who might now be eligible for other tax credits not claimed on the original tax return.

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National Taxpayer Advocate: IRS Resumes Passport Certification Program

The IRS recently announced that it resumed its Passport Certification program on March 14, 2021. The IRS is again notifying the Department of State of taxpayers certified as owing seriously delinquent tax debt. On March 25, 2020, the IRS suspended certain collection activities including passport certification under the People First Initiative in response to the Coronavirus (COVID-19) pandemic. Affected taxpayers will receive notices and are encouraged to pay what they owe or enter into a payment agreement with the IRS to avoid putting their passports in jeopardy – see the Actions you can take section below. The great majority of certifications are related to pre-pandemic liabilities that are considered a priority for the IRS due to the amount owed and length of time the taxpayers have been delinquent without working with the IRS to resolve their tax debts. The law generally requires the IRS to certify individuals to the Department of State when they have unpaid, legally enforceable federal tax debt totaling more than $54,000 (including interest and penalties) for which a notice of federal tax lien has been filed and all administrative remedies under Internal Revenue Code Section 6320 have lapsed or been exhausted, or a levy has been issued. Per the law, the State Department generally will not renew passport or issue a new passport after receiving certification from the IRS, and in some cases may revoke the passport. If the taxpayer is overseas, the State Department may issue a limited validity passport good for direct return to the United States. However, before denying a passport renewal or new passport application, the State Department generally will hold the taxpayer’s application for 90 days to allow taxpayers to: Make full payment of the tax debt, or Enter a satisfactory payment arrangement with the IRS, or Resolve any erroneous certification issues. Once resolved, the IRS, generally, will reverse the certification within 30 days of the date of resolution and provide notification to the State Department as soon as practicable. Actions you can take Payment of taxes The IRS offers a number of programs to help taxpayers meet their tax obligations including payment agreements, Offers in Compromise, and, if the IRS determines a taxpayer cannot pay any of their tax debt, a temporary delay of the collection process. You can also view our Taxpayer Advocate Service Paying Taxes Get Help pages for descriptions of payment options if you are unable to pay in full. If you recently filed your tax return for the current year and expect a refund, the IRS will apply the refund to the debt. If the refund is enough to satisfy your seriously delinquent tax debt, the IRS considers the account fully paid. However, taxpayers should not solely rely on this option to resolve the issue at this time, because of 2019 and 2020 tax return processing delays due to the Coronavirus (COVID-19) pandemic. Disagree with the tax due If you disagree with the tax amount or the certification was made in error, you should contact the phone number on Notice CP508C: 855-519-4965; 267-941-1004 for international callers. If you’ve already paid the tax debt, please send proof of that payment to the address on your Notice CP508C. Imminent travel plans If you’re leaving soon for international travel, you should contact the IRS promptly using the phone number on the Notice: 855-519-4965 or 267-941-1004 for international callers. The IRS.gov Revocation or Denial of Passport in Case of Certain Unpaid Taxes webpage has more information about this program and actions you can take to resolve the debt. More resources Understanding Your CP508C Notice Understanding Your CP508R Notice; Note: this page also has answers to many common passport certification questions IR-2019-23: Individuals Who Need Passports for Imminent Travel Should Contact IRS Promptly to Resolve Tax Debt

The IRS recently announced that it resumed its Passport Certification program on March 14, 2021. The IRS is again notifying the Department of State of taxpayers certified as owing seriously delinquent tax debt. On March 25, 2020, the IRS suspended certain collection activities including passport certification under the People First Initiative in response to the Coronavirus (COVID-19) pandemic.

Affected taxpayers will receive notices and are encouraged to pay what they owe or enter into a payment agreement with the IRS to avoid putting their passports in jeopardy – see the Actions you can take section below. The great majority of certifications are related to pre-pandemic liabilities that are considered a priority for the IRS due to the amount owed and length of time the taxpayers have been delinquent without working with the IRS to resolve their tax debts.

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National Taxpayer Advocate Report To Congress

National Taxpayer Advocate

IRC § 7803(c)(2)(B)(ii)(III) requires the National Taxpayer Advocate to prepare an Annual Report to Congress that contains a summary of the ten most serious problems encountered by taxpayers each year. For 2020, the National Taxpayer Advocate has identified, analyzed, and offered recommendations to assist the IRS and Congress in resolving ten such problems.

Most Serious Problems Encountered by Taxpayers

IRS RECRUITMENT, HIRING, AND EMPLOYEE RETENTION: Quality Taxpayer Service and Protection of Taxpayer Rights Are Directly Linked to the IRS’s Need to Improve Its Recruitment, Hiring, and Retention Strategies
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