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Taxpayer Advocacy Panel
(TAP)
Want to improve
the IRS?¨SPEAK
UP
Andrea Price, TAP member representing Ohio
The Truth Contributor
The Taxpayer Advocacy Panel is comprised of civic-minded
citizen volunteers from all walks of life representing each
state, D.C., Puerto Rico and an international member
(citizens living, working or doing business abroad). TAP is
a Federal Advisory Committee whose mission is to listen to
taxpayers, identify taxpayers’ issues and make suggestions
for improving the IRS service and customer satisfaction.
Everyone has something to say about taxes and the IRS.
Please take a moment to give us your suggestions for TAP to
consider by contacting one of the following:
TAP Ohio member:
tapohioandreaprice@gmail.com
Call Toll-free at:1-888-912-1227
Website:
www.improveirs.org
The Taxpayer Advocate Service (TAS) is your voice at the
IRS. TAS is required to report annually to Congress under
Section 7803(c)(2)(B)(ii) of the Internal Revenue Code
(IRC).
National Taxpayer Advocate introductory remarks to Congress-
2020 Year Annual Report
Despite the IRS’s overall success in managing the filing
season and accurately paying the significant majority of
Economic Impact Payments (EIPs), some taxpayers experienced
major problems, and the agency was not always fully
transparent about its struggles. Four areas stand out:
1.
Millions of taxpayers experienced lengthy delays in
receiving their tax refunds. The significant majority of
taxpayers who file tax returns receive refunds, and the
average refund in recent years has exceeded $2,500.
Particularly for low-income taxpayers, timely receipt of
refunds can be critical. In 2020, there were two significant
sources of refund delays. The first was the IRS’s inability
to timely open and process the roughly 16 million paper tax
returns it received. The majority of these taxpayers likely
were entitled to refunds, yet they had to wait many months
longer than usual to receive them. According to an update
posted on the IRS website, there were still 7.1 million
unprocessed individual returns and 2.3 million unprocessed
business returns as of November 24, with some dated as early
as April 15 — more than seven months earlier.
A second source of refund delays resulted from the IRS’s
fraud detection filters. Each year, all returns claiming
refunds are passed through filters designed to detect
fraudulent wage or identity theft-based claims. For many
years, the filters have generated high false positive rates,
leading to refund delays
for those returns flagged. The problem was compounded in
2020 because the IRS notifies taxpayers of refund holds by
written correspondence, and the IRS was delayed both in
sending notices and in processing taxpayer responses.
Overall, the IRS’s fraud filters flagged 5.2 million returns
claiming refunds. For about 25 percent of the returns
flagged for income verification, refunds took longer than 56
days. For about 18 percent of the returns flagged for
identity verification, refunds took longer than 120 days.
While we support the IRS’s goal of identifying and
preventing fraudulent refund claims, we encourage the IRS to
continue to refine its filters to detect fraudulent claims
with greater precision.
2.
Millions of eligible individuals did
not receive some or all of the EIPs for which they were
eligible.
Last spring, the IRS took the position that it generally
would not correct EIP mistakes in 2020. We pointed out that
the CARES Act directed the IRS to pay EIPs “as rapidly as
possible,” and
we urged the IRS — both internally and externally through
our mid-year report and in blogs — to correct EIP
underpayments in 2020. As 2020 progressed, the IRS agreed to
fix some categories of EIP problems, focusing on problems
that could be corrected through automation. The IRS did not
create programming to allow manual adjustments of individual
accounts until September, and even then, only a limited
number of issues could be manually corrected. While the
IRS’s inclination to use automation wherever possible is
understandable in light of its human resource constraints,
its approach left taxpayers frustrated and without the funds
some of them desperately needed.
The IRS is quickly issuing the second round of stimulus
payments authorized by the COVID-19 relief provisions
included in the Consolidated Appropriations Act, 2021,
signed into law on December 27, 2020. I am optimistic the
lessons learned from the first round will make the process
go more smoothly in 2021, and to the extent there are any
inconsistencies or errors, taxpayers will be able to address
them with the filing of their 2020 income tax returns rather
than waiting for the IRS to correct erroneous payment
amounts.
3.
Millions of taxpayers received late
notices bearing dates that had passed and, in many cases,
response deadlines that also had passed.
During the time crucial IRS functions were shut down last
spring, the IRS automatically generated more than 31.2
million notices. By the time the IRS was ready to mail them,
the dates on the notices had passed, some by several months,
and some notices included response deadlines that also had
passed. Nevertheless, the IRS mailed 18.9 million notices
(after purging the balance). The IRS included an “insert”
with about 1.8 million notices because it needed to give
taxpayers an extension of time to act. However, the IRS
failed to include these inserts with other notices that
should have contained them and had to issue supplemental
letters informing affected taxpayers of additional
extensions.
Late notices caused considerable confusion and anxiety for
taxpayers who feared they had missed critical response or
payment deadlines. At the time I first blogged about this
situation in June, we believed it was a one-time occurrence.
We were wrong. During November 2020, the IRS was unable to
timely mail out over 11 million additional notices after
they were automatically generated. Like the first time, the
IRS purged millions of notices that could not be mailed
timely. The nearly five million remaining time- sensitive
notices are being mailed in December and January. This time,
the IRS is including yet another insert extending the
response time. The IRS must take steps to ensure this does
not happen a third time.
4.
Public information about the status of
IRS operations and processing backlogs was insufficient.
While the IRS took some
steps to keep the public informed about COVID-19-related
delays, particularly later in the year, taxpayers often did
not understand what was happening with their tax returns,
refunds, balances, or EIPs. Many taxpayers called the IRS or
TAS simply to get information because they did not have
access to the IRS website, did not know how frequently the
IRS updated
its website information, or did not know where to turn to
obtain information. The IRS could have placed a “COVID-19
Dashboard” on its website and updated its estimate of the
number of returns it was processing weekly and the
anticipated time for payment of refunds.11 It could have
issued weekly news releases to publicize this information.
Similarly, the IRS could have posted a chart listing the
major sources of EIP problems and indicating which ones it
would address and when. It also could have provided more
detailed information about the status of its operations.
For much of the year, relatively limited information was
released, and comments made by IRS officials often were
incomplete or misleading. For example, IRS officials stated
the agency would reopen facilities in all states by
mid-July. Many observers reasonably interpreted those
statements as indicating the IRS would be fully operational.
In fact, some operations continued at limited capacity,
bringing only a small percentage of employees into offices
at a time to allow for adequate social distancing. As we
enter the 2021 filing season, I strongly urge the agency to
widely disseminate weekly updates on any processing delays
and on the status of agency operations both on its website
and through weekly news releases.
The challenges created by the COVID-19 pandemic will
continue through the 2021 filing season and possibly for
months longer, affecting both the IRS and taxpayers.
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