National Taxpayer Advocate (NTA) Erin M. Collins released an objectives report to Congress on June 29. The report identifies taxpayer challenges arising from the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136), and the IRS’s implementation of the Taxpayer First Act (TFA) ( P.L. 116-25) as priority issues which the Taxpayer Advocate Service (TAS) plans to focus on in the coming year. The report also assesses the 2020 filing season and identifies other TAS focus areas.
The report praised the IRS for acting quickly to postpone over 300 filing, payment, and other time-sensitive deadlines, provide broad relief from compliance actions, and disburse some 160 million Economic Impact Payments (EIPs) authorized by the CARES Act, enacted on March 27, 2020. However, there are notable adverse taxpayer impacts, including: (1) delay in receiving tax refunds; (2) difficulty faced by taxpayers in obtaining help from the IRS; and (3) the IRS’s delay in sending out collection notices to taxpayers.
The report lauded the IRS’s efforts in implementing the CARES Act. However, the following challenges remain, including: (1) delay in receiving EIPs; (2) struggle of employers in determining whether they qualify for the employee retention credit (ERC) and in what amounts; (3) areas of the ERC that require further clarification which, if not provided, will cause taxpayers to be more likely to make unintentional errors, increasing the risk of an audit; and (4) challenges businesses face when seeking to utilize the CARES Act provision that authorizes the use of net operating losses to offset taxable income in prior years.
Taxpayer First Act
The report expressed concern that the IRS has not properly implemented a TFA provision directing it to establish a single point of contact for identity theft victims, and that it may not properly implement a provision directing it to exclude taxpayers with adjusted gross incomes at or below 200-percent of the Federal Poverty Level from assignment to private debt collection agencies by December 31, 2020.
2020 Filing Season
Since the IRS closed most of its operations in March and postponed many filing and payment deadlines from April 15 to July 15, the filing season cannot fairly be compared with prior years. The disruption caused by COVID-19 and the postponed due date has had the following major impacts on the 2020 filing season:
- The IRS could not staff phone lines to assist callers beginning the week of March 21, 2020.
- After March 20, 2020, taxpayers no longer had access to face-to-face customer service.
- There is a large backlog of incoming mail and the IRS could not process paper returns and process or respond to other written correspondence from taxpayers.
- The IRS has sent only a very limited volume of outgoing taxpayer correspondence.
- There was a substantial reduction in Volunteer Income Tax Assistance, Tax Counseling for
- Elderly, and Low Income Taxpayer Clinic services.
- The National Distribution Center was shut down, depriving taxpayers of a means to acquire pre-printed forms.
- The report said that TAS may provide a more thorough analysis later because of the IRS’s limitations and the postponed filing deadline.
The report has described 10 issues TAS plans to focus on during the upcoming fiscal year. These include working with the IRS to provide taxpayers with limited English proficiency meaningful access to tax products and services; improving the clarity and content of IRS notices and correspondence; improving service to and communication with taxpayers in rural and other communities that lack high-speed internet access; and working with the IRS to refine its screening filters so fewer legitimate returns are flagged as potentially fraudulent and cause refund delays for affected taxpayers.
The Acting NTA had made 78 administrative recommendations in the 2019 year-end report and submitted them to the IRS for response. The IRS has implemented or agreed to implement 41 recommendations. The report made 19 administrative recommendations in other sections of the report. The IRS has taken the position that it is not required to respond directly to them and has provided only general narrative responses. However, the NTA believes the IRS is required to provide direct responses.