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Challenges for the IRS and Taxpayers Ahead of July 15 Filing Deadline

by
Gordon W. McNamee
on
7/9/2020
Challenges for the IRS and Taxpayers Ahead of July 15 Filing Deadline

COVID-19 has exacted a toll on Americans in just about every aspect of life, and that includes the way that we pay our taxes. In March, when the virus was first making itself known throughout the United States, the Internal Revenue Service responded by extending both the filing deadline and payment deadline for individuals’ 2019 taxes. It was moved from April 15th to July 15th, and as the revised deadline approaches, it is quickly becoming clear that the additional time has not made things easier for everyone.

Challenges for the IRS

Part of the challenge that the agency is facing is that they have two big jobs ahead of them: Not only do they need to process tax returns and issue refunds, but they are also responsible for implementing the relief measures instituted by Congress in response to the virus. Add on to that the fact that – like most other major employers –IRS employees were largely directed to work-from-home, and that meant that they lost the ability to perform many of their key functions.

With the July 15th deadline fast approaching, the IRS has started to return to something closer to normal operations. Many employees are now back in their regular workplaces, and though that means that they can go back to their normal activities, there is a mountain of tax returns that still need to be processed, and there are taxpayers who have been waiting patiently for help with questions.

Congress is concerned about the agency’s operations, and the Senate Finance Committee asked IRS Commissioner Charles Rettig to testify at a recent hearing. In answering questions, he gave assurances to his staff’s commitment to accomplishing their assigned tasks, saying, “While we had to adjust and redeploy resources during the pandemic, our employees have remained dedicated to delivering the 2020 filing season.”

To illustrate how much work had been done despite obvious challenges, he listed the various processes that had continued throughout the pandemic, including processing electronic returns, accepting electronic payments and issuing refunds via direct deposit. Now that employees are returning, their focus has been on responding to mail, reopening telephone lines and processing paper tax returns. Rettig assured the committee about the seriousness with which agency employees are responding to their obligation, saying, “We are prioritizing refunds and customer service operations, as well as the health and safety of our employees and everyone that we interact with.”

Though there has been some talk about extending the filing and payment deadline further, the IRS has indicated that will not be happening, and that those who need more time for filing should avail themselves of the October 15th extension. As for those whose finances are keeping them from paying their taxes in fully by July 15th, the agency has made several payment options available.

The pandemic has not prevented the majority of American taxpayers from having submitted their returns, but it has impacted the IRS, which has been extremely challenged. Based on a statement released on June 26 by the agency, far fewer returns and refunds have been processed than was true at the same point in time last year, with returns processed down 10.6 percent and refunds down 10.3 percent (129 million and 94 million respectively.) These statistics have both IRS watchdog groups and lawmakers worried.

In a report published for an independent office within the IRS responsible for resolving taxpayer problems, National Taxpayer Advocate Erin Collins has calculated that there are 4.7 million paper tax returns that had not yet been processed by the middle of May, and that taxpayers who had been owed refunds were experiencing delays as a result of an incorrect IRS filter. Other taxpayers that have sent in responses to IRS queries have also not had their refunds processed. Many of those affected had claimed either the child tax credit or the earned income tax credit (EITC). This means that the delays have hit low-and middle-income families the hardest.

The Senate Finance Committee is chaired by Chuck Grassley (R-Iowa), who questioned Rettig directly about the EITC issue during the hearings. “How long do you expect it to take for the IRS to address the backlog and are there procedures in place to prioritize certain types of correspondence, such as tax returns and audit requests?” he asked.

In response Rettig assured the lawmaker that all backlogged issues are being addressed and assured that the EITC is “an extreme priority.” When asked how much correspondence was in the agency’s backlog, he estimated roughly 12.3 million separate pieces, and said that employees have been told to put paper tax returns, many of which include refunds associated with the EITC, as the front of the line. He also indicated that IRS call centers, taxpayer assistance centers and processing facilities will be reopening by mid-July. He described the measures that will be taken to protect the safety of employees, including social distancing, and added that another 50,000 employees would continue to work remotely in support of the agency.

Another area of concern that lawmakers addressed at the hearing was the distribution of collection notices which had been printed prior to the pandemic and the ensuing agency closures. Many of these referred to amounts due relating to 2019 taxes, and those notices contain due dates that are no longer in effect and which have long passed. To address the issue the agency put inserts into the original notices containing revised dates into the correspondence, but IRS watchdogs worry that taxpayers will be confused. Though the agency has defended its decision to include the inserts by pointing out that it would take longer to reprogram the notification software and print new notices than it does to put in the insert, many believe that the inserts will only create confusion. In a letter to the IRS addressing the issue, House Ways and Means Committee Chairman Richard Neal (D-Mass.) and Rep. John Lewis (D-Ga.), chairman of the Ways and Means oversight subcommittee wrote, “The receipt of a notice with incorrect and conflicting dates is likely to cause unnecessary confusion for many taxpayers.”

To add to the overall problem, while the IRS is addressing COVID-related problems pertaining to the 2019 tax season they also need to plan for the 2020 tax season. One of the challenges that the agency will need to address has to do with the fact that many taxpayers did not receive the coronavirus stimulus payment that they were entitled to. The IRS has indicated that people can claim that payment on their tax returns next year, but Congress is indicating that they’d like to see the full payments issued before then. In a letter to Mr. Rettig, Congressmen Neal and Lewis wrote, “With a record number of Americans newly unemployed or facing financial insecurity, it would be irresponsible to further delay emergency assistance that Americans desperately need now.”

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Gordon W. McNamee

Gordon W. McNamee

Gordon W. McNamee is a Certified Public Accountant (CPA) based in Rancho Cucamonga, CA. Gordon W. McNamee can assist you with your tax return preparation, payroll, accounting and tax planning needs. <br /> <br /> 2021 is Gordon W. McNamee, CPAs 38th year in the profession. As as a former IRS agent (1984 through 1987), Gordon has been in public accounting since 1987. Gordon specializes in individual, corporate, HOA, trust, estate and payroll taxes. He also prepares financial statements and provides accounting & bookkeeping services. He enjoys making his clients feel at ease while providing a personalized professional service.

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