Both taxpayers and tax preparers find themselves in a strange situation: craving more – not less – interaction with the IRS. The last 15 months during the pandemic have taken what was an already tenuous relationship and made it worse. The pandemic has had a significant impact on companies’ and individuals’ interactions with the IRS; whether it be receiving tax refunds, resolution of notices, or even confirmation of election filings. I sat down (via Zoom) with two former senior-level IRS personnel, (one of whom only very recently joined the private sector) to get their input on the situation.
The IRS, an organization whose budget is roughly 70% allocated to labor costs, has been the target of reduced funding and budget cuts in past years. Given that technology-wise, the “Service” left a lot to be desired (e.g.: document transmission by fax ), the COVID pandemic represented the perfect storm in terms of not only increasing workload, but also fundamentally changing the way the organization thought about the workday. Tax law changes from the CARES Act, coordinating stimulus checks, processing refund applications, employee retention credits, and etc. added to the already-heavy workload that has now accompanied two tax return filing seasons. Added to the mix was the fact that approximately 90% of the IRS’ workforce was made “portable” (i.e. working remotely), yet paper filings and hard-copy correspondence continued to pour into the IRS campuses at the relevant service centers. The result was the equivalent of a tax-world urban legend: tractor trailers full of unopened correspondence, piling up and waiting to first be opened, and then to be processed. The current unofficial estimate is that the IRS will be caught up with the mail by “this summer.”
Live communication with the IRS has also been a challenge. Earlier this month, the IRS’ own Taxpayer Advocate Service estimated that only 1-in-50 calls into the 1040 help line was being answered. If you’re trying to phone in a response to a notice or assessment letter, be prepared to wait. Many practitioners, after having no luck on the phone, have resorted to sending in written correspondence (it may be a long summer, adding to the mail issue). The internal guidance to revenue officers has been to show leniency and flexibility in terms of putting holds on collection notices, etc.; but, there is no guarantee. We are told that time-sensitive elections, in which a postmark date can be critical, will be respected, even if it takes a while to get your letter to the IRS opened. As for the typical 1040-filer, assuming the tax return was filed electronically, and it gets processed automatically, the refund will probably show up in a few weeks. If yours is one of the 29 million returns that has been pulled for manual processing, it’s hard to know for certain when that will happen.
So, will some good come out of all this chaos that taxpayers are experiencing? The optimistic view at the IRS is that this will spur modernization of IT systems and allow for more virtual collaboration going forward. IRS veteran Ken Corbin has been named as the new “Chief Taxpayer Experience Officer.” Revenue agents have adapted to virtual meeting venues and more information is being exchanged via email than ever before. As for when all IRS personnel will be back on campus and things will be business as usual, there is no date on the calendar. Not only will the IRS have to formalize a plan, but the National Treasury Employees Union will have major input as well.
For the time being, sound advice from one of my IRS sources, which is as applicable here as it is in the rest of our current pandemic recovery is “Be patient.”