National Taxpayer Advocate | TaxConnections

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

12 May 2021

Be Safe On Social Media – Do Not Post Your Tax Information

Waiting on your tax refund can be difficult. It can be even more so when you are unsure about the status or why there might be a delay beyond the timeframe you expected your refund. While you are checking the status of your refund or responding to any IRS requests for additional information, the Taxpayer Advocate Service (TAS) urges you to protect your personal and tax account information.

Social media timelines, forums and community groups may be a great way to connect with others and even comment publicly about something, but it’s not a great place to share your personal tax information.

Turning to social media and posting personal financial information such as tax transcripts or refund details are just examples of what you should not be doing. Also, asking personal tax details of others, puts you and them at risk for identity theft.

Written by National Taxpayer Advocate | Posted in TaxConnections

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

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
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

18 Mar 2021

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 filing 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 beginning in April 2020 and then for an additional $600 per person beginning 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 Recovery Rebate Credits

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/

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

05 Mar 2021

Feel Like You Are Not Responsible For A Debt Owed By Your Spouse Or Ex-Spouse?

ERIN COLLINS - NATIONAL TAXPAYER ADVOCATE

Taxpayer Advocate Service Tax Tip

Saying “I do” doesn’t necessarily mean you’re responsible for your spouse’s or ex-spouse’s debts.

If your spouse has a debt (this debt could be for any number of things – child support, spousal support, a federal debt (e.g., student loans), or a federal tax debt) and you file your taxes using the Married-Filing-Joint tax filing status, the IRS can apply your refund to one of these debts, which is known as an “offset”. Or they can take a collection action against you for the tax debt you and your spouse owe, such as filing of the Notice of Federal Tax Lien or issuing a levy. However, if you’re not legally responsible for the past-due amount, you may still be entitled to receive your share of the refund or request relief from joint and several liability, depending on the facts of the situation.

Written by National Taxpayer Advocate | Posted in Innocent Spouse Relief • National Taxpayer Advocate Purple Book

16 Feb 2021

National Taxpayer Advocate 2021 Purple Book

The National Taxpayer Advocate is releasing the National Taxpayer Advocate 2021 Purple Book. In it, she presents a concise summary of 66 legislative recommendations that she believes will strengthen taxpayer rights and improve tax administration. Most of the recommendations have been made in detail in prior reports, but others are presented in this book for the first time. She believes that most of the recommendations presented in this volume are non-controversial, common sense reforms that the tax-writing committees and other Members of Congress may find useful.

Among the 66 legislative recommendations for consideration by Congress are:

• Provide the IRS with sufficient funding to meet taxpayer needs and improve tax compliance. Since fiscal year (FY) 2010, the IRS’s budget has been reduced by about 20 percent after adjusting for inflation. As a result, the IRS has been unable to meet taxpayer needs (e.g., the IRS received over 100 million telephone calls in FY 2020, yet employees were only able to answer about 24 percent). IRS also has been unable to modernize its information technology (IT) systems. In FY 2020, the IRS collected about $3.5 trillion on a budget of about $11.51 billion, producing a remarkable return on investment of more than 300:1.

Written by National Taxpayer Advocate | Posted in National Taxpayer Advocate

12 Feb 2021

If You Didn’t Get Your Economic Impact Payment, Your Joint Tax Return May Be the Reason Why

If you didn’t receive your Economic Impact Payments (EIPs) and a 2018 or 2019 joint return was filed in your name without your consent, you may be eligible to claim the Recovery Rebate Credit (RRC) on your 2020 tax return. Since the issuance of the first round of EIP, our office has been working with the IRS Office of Chief Counsel and the IRS to establish procedures to help a victim of domestic violence where their spouse filed a joint return without the victim’s consent, and kept the EIP that was based on that joint return. On November 16, 2020, the IRS updated its procedures specific to EIP when a joint return election is invalid, and therefore there is an invalid return as to one of the spouses.

Economic Impact Payments

The IRS issued EIPs by looking at taxpayers’ recent federal income tax returns, either 2018 or 2019 for the first round of EIP, and 2019 for the second round. But what if the EIP was based on a return with married filing jointly filing status that was not valid? What if one spouse signed a married filing joint return under duress? What if one spouse never intended to file a joint return and the other spouse forged his or her signature? What if the individuals were not legally married? These are just some of the questions that may point to a conclusion that the joint election was invalid, and the return was invalid as to the victim; it’s an issue that often comes up with victims of domestic violence. When the IRS concludes that a joint election was invalid, the IRS follows Internal Revenue Manual (IRM) procedures, found in IRM 21.6.1.5.7, for changing the taxpayers’ accounts from “married filing jointly” status to single, married filing separately, or head of household.

Written by National Taxpayer Advocate | Posted in National Taxpayer Advocate

26 Jan 2021

Tax Professional Alert: Protecting The Rights Of Taxpayers Who Rely On IRS Frequently Asked Questions

Consider this: In the course of preparing your federal income tax return, you are wondering whether a particular expense is deductible. You go to the IRS website and find a “Frequently Asked Question” (FAQ) that’s directly on point. Good news: The IRS says the expense is deductible. So you deduct it. The next year, the IRS audits your return. The examining agent informs you the IRS changed its position after you filed your return. The examining agent not only denies the deduction, but he imposes a 20 percent accuracy-related penalty as well. You go back to IRS.gov to try to find the FAQ you relied on, but it’s gone.

If the Taxpayer Bill of Rights is to be given meaning, this scenario violates “The Right to Informed” and “The Right to a Fair and Just Tax System.” It is neither fair nor reasonable for the government to impose a penalty against a taxpayer who follows information the government provides on its website.

Written by National Taxpayer Advocate | Posted in National Taxpayer Advocate • Protect Taxpayer Rights