Taxpayers who underpaid taxes or even failed to pay taxes outright in the past few years may have effectively benefited from a Covid-related grace period. But they should be aware that the grace period is ending, and they may soon hear from the Internal Revenue Service (IRS).
Normally, the IRS sends out automatic notices to taxpayers for situations such as if they have a balance due from a filed tax return or if they have failed to file a return. However, during the height of the Covid pandemic, the IRS closed its offices, just as other federal agencies had done. And the result of the closure was that millions of original and amended tax returns went unprocessed.
To be fair to taxpayers who had returns sitting, unreviewed, in the IRS offices, the agency put an indefinite hold on sending many of its automatic collection notices to taxpayers until the agency had cleared the backlog.
But with the pandemic officially over, IRS officials have recently begun suggesting that they'll soon restart sending these automated notices—as soon as the end of this summer.
This doesn't mean that everyone will be getting notices all at once. The agency couldn't handle all of the resulting mail, calls, and queries from taxpayers. That would just result in another mammoth backlog. So the agency will probably take a staggered approach when it restarts the letters.
Some industry experts predict that the IRS will first focus on aging tax debts—i.e., debts the IRS must get soon because their collection will hit statutory deadlines (after which the IRS could no longer collect the debt)
The agency has also said it will revamp some of its initial notices to engage taxpayers and help them early in the processes. The agency aims to get taxpayers to resolve issues rather than immediately crush them with levies and liens.
If you have any tax issues, don't wait to receive a notice. You should contact a tax attorney as soon as possible. While it's always better to be proactive in working with the IRS, now is the time to resolve your issue because it will be more difficult to do so once millions of other Americans have received tax notices and want their tax issue heard, too. If you need help, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.