National Taxpayer Advocate | TaxConnections

16 Mar 2022

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

Written by National Taxpayer Advocate | Posted in National Taxpayer Advocate

13 Jan 2022

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

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

Written by TaxConnections Admin | Posted in National Taxpayer Advocate

07 Sep 2021

NTA: 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.

Written by National Taxpayer Advocate | Posted in National Taxpayer Advocate

20 Aug 2021

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.

Written by National Taxpayer Advocate | Posted in IRS On Math Error Notices • National Taxpayer Advocate

19 Aug 2021

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.

Written by National Taxpayer Advocate | Posted in IRS Math Error Corrections • National Taxpayer Advocate

01 Jul 2021

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.

Written by National Taxpayer Advocate | Posted in National Taxpayer Advocate

29 Apr 2021

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:

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.

Written by National Taxpayer Advocate | Posted in National Taxpayer Advocate

08 Apr 2021

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.

Written by National Taxpayer Advocate | Posted in National Taxpayer Advocate

02 Apr 2021

National Taxpayer Advocate Report To Congress

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
Read More

Written by National Taxpayer Advocate | Posted in National Taxpayer Advocate

01 Apr 2021

Taxpayers, Bankruptcy, And The Statutory Notice of Deficiency

Although extended unemployment benefits, eviction moratoriums, stimulus payments, small business loans, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Consolidated Appropriations Act, 2021, and other government programs may have stemmed the tide of anticipated COVID-related bankruptcy filings, seeking bankruptcy relief may still be the most appropriate option for some taxpayers experiencing financial difficulties in the wake of the COVID pandemic. Bankruptcy relief allows debtors to receive forgiveness of many of their debts, subject to complex rules. Further, upon filing a petition in bankruptcy court, debtors generally receive a reprieve from their creditors’ collection actions, and that includes the IRS.

The filing of a bankruptcy petition generally triggers an “automatic stay” that immediately stops current and future collection actions for pre-petition debts and property of the bankruptcy estate for the pendency of the bankruptcy case. Pre-petition debts include taxes incurred before the filing of the bankruptcy petition, even if they were not yet assessed. Income taxes are considered incurred on the last day of the income tax year. Generally, the automatic stay lifts upon conclusion of a bankruptcy case, either upon entry of an order discharging the debtor’s eligible debts or an order dismissing the case.

While the automatic stay does not prohibit the IRS from assessing deficiencies that have been agreed to by the taxpayer’s signature of consent or full payment of tax, it does limit certain IRS compliance activity for unagreed deficiencies covered by the bankruptcy.

Written by National Taxpayer Advocate | Posted in National Taxpayer Advocate

17 Mar 2021

Offset Of Recovery Rebate Credits: The IRS Has Agreed To Exercise Its Discretion To Stop Offsets of Federal Tax Debts

https://www.taxpayeradvocate.irs.gov/news/nta-blog-update-on-offset-of-recovery-rebate-credits-the-irs-has-agreed-to-exercise-its-discretion-to-stop-offsets-of-federal-tax-debts/

In a previous blog, I pointed out that a change in the law made in late December affected the treatment of recovery rebate credits (RRCs) claimed on taxpayers’ 2020 income tax returns. Unlike the advance payments issued to individuals last spring and in early January, the credit claimed on a 2020 tax return will be reduced to pay off certain outstanding debts. This offset creates an inconsistency between the treatment of the advance payments and the treatment of RRCs claimed on 2020 tax returns where the RRC will be reduced by outstanding liabilities. This is a big deal for taxpayers affected by the change.

Good news: The IRS has agreed to use its discretion to bypass offsets for federal tax debts for taxpayers who file 2020 returns that claim the RRC.

By Way of Background

When Congress directed the IRS to issue stimulus payments (otherwise known as Economic Impact Payments or EIPs) of $1,200 per adult and $500 per qualifying child in April 2020 and then for an additional $600 per person in December, it required that the payments be issued without reduction to satisfy other debts of the recipient (except for child support for the first round of payments). The rationale seemed clear: Individuals in debt are often the ones financially struggling the most, and Congress wanted the funds to reach these people without any reductions as soon as possible.

Written by National Taxpayer Advocate | Posted in National Taxpayer Advocate

04 Mar 2021

Wait, When Did This Virtual Currency Question Appear On My 1040 Tax Form?

The IRS Form 1040 now includes a checkbox which taxpayers must address regarding virtual currency. The form asks taxpayers if “at any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?” The key question at hand is who is required to answer “Yes” and who may answer “No?” National Taxpayer Advocate Erin M. Collins addresses these and many other questions taxpayers have when it comes to virtual currency and their taxes.

Given the explosion in virtual currency, the IRS has increased its focus on virtual currency tax compliance. In 2019, the IRS sent letters to over 10,000 American taxpayers who may have failed to report their virtual currency transactions and pay the associated income taxes. The National Taxpayer Advocate says, “taxpayers should proceed with care in order to experience the benefits of virtual currency while avoiding its pitfalls.”

Written by National Taxpayer Advocate | Posted in 1040 Tax Return Form • National Taxpayer Advocate • Virtual Currency