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Feeling overwhelmed and not sure how to handle those overdue notices from the Internal Revenue Service (IRS)? You aren’t the only one. Taxpayers have been complaining about the receipt of notices showing a balance due with impossible deadlines.
How many notices went out? According to the Taxpayer Advocate, during the pandemic-related shutdown, the IRS generated more than 20 million notices; however, these notices were not mailed to taxpayers. So, the IRS started mailing them out.
Simultaneously, in June, the estimated backlog of unopened IRS mail stood at 11 million. That means that taxpayer checks remained uncashed.
The IRS recently noted that “If a taxpayer mailed a check (either with or without a tax return), it may still be unopened in the backlog of mail the IRS is processing due to COVID-19.”
The combination of unopened mail and past-due notices has heightened anxiety and tempers.
On August 19, 2020, House Ways and Means Committee Chairman Richard E. Neal (D-MA) sent a letter to the IRS demanding that the notices stop.
“These notices impose unnecessary stress on taxpayers who, upon receipt, must contact the IRS for assistance,” Neal wrote. “This is particularly troubling at a time when the IRS is telling taxpayers who need to call the agency ‘to expect long waits due to limited staffing.’ Taxpayers reaching out for assistance on the telephone must hope someone can answer their call and that all payments they have made have been opened, processed, and indicated on their account. Certainly, any additional correspondence generated by these notices can prove difficult for the IRS to handle and cause significant delays for taxpayers seeking fair resolution.”
You can read the letter here (downloads as a PDF).
The IRS has now announced that they have suspended the mailing of three notices:
- the CP501 (typically, a balance due);
- the CP503 (you still have an unpaid balance and the IRS hasn’t heard from you); and
- the CP504 (you still have an unpaid balance, you REALLY haven’t responded, and the IRS intends to levy).
These follow-up notices are typically automatically sent to taxpayers who do not respond to an initial notice of balance due (called a CP14). However, these automatic follow-up notices will be temporarily stopped until the backlog of mail is reduced.
There is no current deadline to resume the follow-up notices. The IRS says that it will make the determination as the backlog is cleared.
As for those unopened checks? They will be posted and credited on the date the IRS received them – rather than the date the agency opened and processed them.
That means that you should not cancel your original check. Just because it hasn’t been cashed or credited doesn’t mean that it has gone missing: it’s likely only temporarily diverted.
And, don’t spend that money. Assume that the IRS will cash your check any day now. While the IRS is providing relief from bad check penalties for dishonored checks the agency received between March 1 and July 15 due to delays in this IRS processing, interest and penalties may still apply.
Finally, save yourself some time and energy and don’t call. The IRS says it will make things right (eventually), so there’s no need to call, file a second return, or cancel any outstanding checks.
If you have any questions about your next steps, reach out to your tax professional. But if you get a notice this week from the IRS, be prepared to cut the agency some slack. Some taxpayers and tax professionals may still receive these notices during the next few weeks due to notices that are already in the mail.