IRS Struggles Lead to Suspended Notifications

Dealing with the IRS can be challenging for many businesses and individual taxpayers, and because of this most would prefer not to engage with the agency, whether it is a missing return, request for additional information, or an outstanding balance. Despite the aversion, resolving issues and concerns has traditionally been a process that unfolded according to certain timeframes. In 2021, the paradigm shifted, resulting in significant delays in return processing due to larger than expected backlogs and ineffective telephone support. The combination of these and additional delays in processing taxpayer responses to IRS Notices have led to the premature collection and other inaccurate automatic notifications, causing significant stress for recipients.

The IRS is pursuing several changes to alleviate the challenges, including a new hiring campaign to obtain the needed staff. There will also be a suspension of more than a dozen types of communication, including automated notifications typically sent when a return has not been filed, or an outstanding balance is due. Outlined in IR-2022-31, these notifications will no longer be sent until the agency has worked through the substantial backlog.

Suspended IRS Notifications

In the news release, there were several automated notices which were specifically mentioned as part of the program, including:

• CP80 – Generally sent when the IRS credited payments and/or other credits to a taxpayer’s account for the tax period shown on the notice, but the IRS hasn’t received a tax return for that period.
• CP59 – Notice there is no record of a prior year individual return being filed.
• CP516 – Reminder that a prior year individual tax return has not been received.
• CP518 – Final reminder that a prior year individual tax return has not been received.
• CP501 – Reminder there is an outstanding balance on a taxpayer’s account.
• CP503 – Second reminder there is an outstanding balance on a taxpayer’s account.
• CP504 – Final notice that a payment has not been received for an unpaid balance. This includes a Notice of Intent to Levy.
• 2802C – Notification sent to taxpayers who have been identified as having under-withheld federal taxes from wages.
• CP259 – Notice sent to business taxpayers when there is no record of a prior year(s) return being filed.
• CP518 – Final reminder notice that there is no record of a prior year(s) return being filed.

It is important to note that not all notifications will be suspended. For example, some letters are legally required to be sent according to specific guidelines and timeframes in certain circumstances. The IRS also stresses that simply because the notifications have been suspended, it does not mean that outstanding taxes due along with corresponding penalties, fines, and interest will not be assessed. In other words, if a taxpayer has a legitimate balance or filing omission, it should be corrected immediately.

It is unclear how long the suspension will last as a specific timeframe has not been provided. However, it appears the IRS will continue to evaluate the backlog and make ongoing evaluations on when it is appropriate to resume the mailings.

The issues at the IRS have unfortunately created unnecessary concern and stress for many taxpayers. The suspension of these notifications is a positive sign the agency is addressing the problem.

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©2022 Klatzkin & Company LLP. The above represents our best understanding and interpretation of the material covered as of this post’s date. The content is provided for informational purposes only and does not constitute accounting, tax, or financial advice. Please consult your advisor concerning your specific situation.