ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – THE IRS IS IN ONE HELL OF A MESS! – PART 1
By Robert S. Schriebman
It is no secret that Covid has created havoc everywhere. The IRS has also felt the brunt of this pandemic. IRS employees at every level, from auditors, to collectors, to clerical staff at the Service Centers are working remotely if at all. Recent media reports show an IRS woefully backlogged almost to the point of paralyses. According to Treasury Secretary Janet Yellen, as of late December 2021, the IRS has a backlogged of 6 million individual income tax returns and other 2.3 million amended individual tax returns to process. It also has 2 million quarterly and annual payroll tax returns that need to be processed along with another 500,000 amended quarterly payroll tax returns to be processed. These sad and alarming statistics do not mention the backlog of corporate and partnership tax returns. I cannot recall another time in my career of 53 years of practice when I have seen the IRS in such a mess. The Taxpayer Advocate Service (TAS) is refusing to take on any new cases involving amended returns because it simply cannot handle the avalanche of paper thrown at them. Taxpayers, who are calling the IRS, who are concerned about their refunds or are responding to IRS notices, are told to call back at a minimum of 16 weeks or 4 months!
Powers of Attorney Ignored
One of the cornerstones in the administration of systems of taxation in both the IRS and state agencies has been the recognition and processing of powers of attorneys for effective representation of taxpayers. A taxpayer representative, whether an attorney, CPA or Enrolled Agent, cannot effectively represent a client unless and until the power of attorney is officially recognized. The IRS is experiencing unprecedented delays in this recognition process.
Taxpayers who are experiencing harsh enforced collection action, and who are seeking emergency relief, are getting no response at all from traditional relief channels. I have personally seen runaway account levies that are continuous and where the IRS has over collected by hundreds of thousands of dollars. For these taxpayers there is no relief in sight. Refund claims can be filed, but if tax returns are hopelessly delayed, ipso-facto refund claims will also be unreasonably delayed.
Millions of forms are being filed and there is no one available to open the mail. Collection notices, tax liens and levies continue to be automatically generated by computers and many of them are mistargeted.
Congress Enters the Quagmire
More than 200 Senators and Congresspersons, responding to complaints from constituents, have demanded that the IRS take immediate action. They want the IRS to stop sending out collection notices and they want the IRS to be more liberal in abating penalties relating to the filing of returns and the paying of taxes. These types of penalty abatements depend upon establishing reasonable cause on the part of the taxpayer. Reasonable cause means that the taxpayer has the burden of proving that he/she conducted their affairs in the same manner as a reasonably prudent business person. Traditionally, the following constituted reasonable cause:
- Death, serious illness or unavoidable absence
- Fire, casualty, or natural disaster
- Inability to obtain necessary records
- Reliance on the advice of a competent tax advisor.
There are more reasonable cause standards set forth in Chapter 20 of the Internal Revenue Manual.
The members of Congress, who signed the petition, want taxpayers to be relieved of penalties if they have been impacted by the pandemic. They are also demanding that the IRS expedite the processing of amended returns. In addition to these demands, Congress wants the IRS to put a hold on automated collection activity and to adopt a more liberal policy for penalty abatement requests. The IRS manual provides an automatic first-time penalty abatement when requested by the taxpayer. In addition to this first-time abatement, Congress wants the IRS to offer a reasonable cause penalty waiver in addition to the first-time penalty abatement request. There is also a demand for both a waiver for an underpayment of estimated tax penalty and a late payment penalty for the 2020 and 2021 tax years.
I submit Congress has missed the point in limiting its suggestions that the IRS stop sending out notices and liberalize a few penalties.
I have testified as an expert twice before the Senate Finance Committee and I was instrumental in establishing the Collection Due Process System. My experience has told me that Congress is clueless when it comes to the activities of the IRS. While Congress is demanding a halt to collection notices and more liberal penalty abatement rules, Congress should be focusing on putting a halt to all collection activities and promptly issuing refunds until the IRS resumes normalcy.
Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD and he is not employed by the EDD or any other agency of the State of California.
Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
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