By Matthew R. Staul, EA, MBA
The pandemic infamously ruined operations for many businesses around the world in several ways, including significant staff shortages. The Internal Revenue Service was no exception. Since the inception of the pandemic, the level of service provided by the IRS has taken a nose-dive. Out-of-date technology, the inability to hire and/or retain competent employees, prior budget cuts, and other challenges have contributed to this deterioration of service. At the height of the tax filing season in 2020, the IRS temporarily shut down operations, causing widespread issues, including delayed refunds, unanswered phone calls, and unnecessary delinquent notices. To date, the IRS still has not recovered.
What can you do to avoid personal issues with the IRS?
File your taxes as soon as possible.
Delaying the process of filing your tax return increases the risk for delayed refunds, as the IRS still has over 15 million backlogged tax returns to process. Another tip to avoid delayed refunds is to talk with your accountant about adjusting your estimates so that your refund doesn’t exceed $10,000. The IRS takes significantly longer to process large refunds.
Pay your estimates on time.
The IRS has been sending underpayment penalty notices to everyone that underpays on their estimates, and their automatic notice system is flawed. In many instances, our tax professionals have successfully abated penalties for our clients. The very next week, those same clients receive more notices in the mail saying there has been interest added to their penalty, which had already been abated. This causes clients unnecessary stress and often extra money paid to their accountants for additional IRS calls.
What steps are being taken by the Internal Revenue Service to resolve these issues?
The IRS is doing its part in trying to resolve the issues. They have reassigned 1,200 of their current employees to the mailroom to help with the backlog of tax returns, and they plan on hiring 10,000 new employees before the 2021 tax filing season to try and get a handle on the issue. The Biden administration also implemented an $80 billion funding increase to the IRS to help get them back under control. The IRS’s lack of responsiveness has made it very difficult for accountants to do our job efficiently, but we always do our best to take care of our clients in these matters.
Matthew R. Staul is an enrolled agent with the Medical Management Consulting Group, Inc., a full-service consulting and accounting firm based in Virginia Beach. mmcgonline.com