Late refunds and other IRS questions
Erin Collins, an IRS national taxpayer advocate, offers some answers regarding refunds.
Q: How has the pandemic affected the ability of the IRS to provide service to taxpayers?
A: Social distancing requirements limited IRS operations that require employees to work in close quarters, and that created several categories of work backlogs. The IRS closed a number of its campuses, so it was parking paper tax returns and correspondence in trailers for a while. Refunds on those returns were delayed.
Taxpayers who file their 2020 tax returns on paper will face similar issues, so I urge taxpayers to file electronically to avoid delays.
Q: The IRS has been tasked with distributing stimulus checks and will also be responsible for administering the recently expanded child tax credit. Is the IRS being asked to do too much?
A: The IRS was created as a tax administrator, and in recent decades, it has been asked to administer a number of social programs. The challenge is: Does it have the information technology and infrastructure to be further stretched beyond its traditional tax-collection mission without breaking? The IRS’s outdated information technology, along with reduced funding, has taken a toll on its ability to provide quality service to taxpayers. It will have to be fixed by increasing funding for modernization and infrastructure and staffing.
Q: What should taxpayers do if they can’t afford their tax bill?
A: They should file their tax return and work with the IRS on the payment portion. If taxpayers don’t file on time, they face a penalty of 5% of the amount due per month, for up to 25% of the tax due. The failure-to-pay penalty is substantially less — just 0.5% of the amount due each month. The IRS has been very flexible with taxpayers, especially during the pandemic.
Q: Do you support requiring all tax preparers to meet minimum competency requirements?
A: Absolutely. Taxpayers and the tax system depend heavily on the ability of preparers to prepare accurate tax returns. Over the years, numerous studies have found that non-credentialed preparers routinely prepare inaccurate returns, and some engage in fraud. I believe taxpayers and the tax system would benefit from weeding out incompetent preparers and bad apples.
Q: As the pandemic winds down, what are your priorities for the IRS?
A: I would love to see a robust online account so taxpayers can access their tax returns and transcripts electronically and use email to communicate with the IRS. I realize the IRS has security and privacy concerns and we want to prevent fraud, but so do banks and they’ve been able to make it work for more than two decades. If taxpayers can electronically communicate with the IRS, that would open up the phone lines for people who don’t have the ability to communicate electronically or don’t have broadband.