IRS Logjam

For those of you who don’t spend your evenings perusing the IRS newsroom, here is some information gleaned from a recent update the IRS added that may be of use to you:

The IRS concedes it is woefully behind due to the pandemic, and that includes processing of paper checks. Colleague Nancy Hawes wrote about this last month. Sometimes the IRS processes a tax return, but has not processed the related check sent by the taxpayer, and therefore the IRS believes a payment is missing. Long-outstanding checks sometimes are cancelled by the payer. In its most recent update, however, the IRS warns against cancelling checks, which often can lead to interest and penalties. However, in light of the present circumstances, the IRS will provide relief from such penalties for certain payments received between March 1 and July 15.

A lot of the IRS correspondence (including notices requesting payments or other action) was partially processed, but due to IRS office closures, was not immediately mailed. Many of those notices are being mailed now, but with “respond by” deadlines that already have passed. Some such missives will be accompanied by inserts informing taxpayers that, in spite of the printed deadlines, they have more time to address the notices. Inevitably, it seems that some correspondence may be received that should include those inserts, but will omit them. In spite of all of this confusion, taxpayers generally will be given more time to sort things out with the IRS, given the backlog and backdated correspondence.