The Internal Revenue Service is giving taxpayers a break if the checks they mailed in to pay their taxes still haven’t been opened up yet and are sitting in the trailers the IRS had to set up during the novel coronavirus pandemic.
This spring, as many IRS offices remained shuttered, a backlog of millions of pieces of unopened mail accumulated in trailers set up outside IRS facilities. As more IRS employees returned to work to deal with tax season, they began to sort through and process the mail, but that hasn’t stopped more correspondence from coming in every day.
Isabella Aldrete is a summer reporter at Employee Benefit News. She is currently a senior at Barnard College and a former deputy editor at the Columbia Daily Spectator.
Jonathan Schiff, Ph.D, is a professor of accounting at Fairleigh Dickinson University in Teaneck, N.J. He is the author of over 70 articles and research studies on accounting, controls, performance management, CFO practice development, and financial and cost management. He also served as visiting professor of accounting at Columbia University's School of Business and taught in their MBA and executive MBA programs, and was the founder, in 1995, of the Finance Development & Training Institute (www.fdti.org) a 10-member company alliance, chaired by Dell Technologies. He also established several other best practices sharing alliances including the Activity-Based Costing Implementation Group, the Europe-Finance Leadership Institute, the Transit-Finance Learning Exchange and the China Finance Institute. He has served as chairman of a Nasdaq-listed company audit committee and is frequently quoted in the national business media, including Business Week, The Washington Post, USA Today and The New York Times. Schiff received his Ph.D. from New York University. Before completing his master's degree in accounting at NYU, he worked as a staff auditor with Price Waterhouse.
Lars Boeing is a Vice President in Capgemini Invent's Insurance Practice and leads Capgemini's global Future of Claims offering. He has been working for 20+ years in consulting and industry roles, primarily focused on strategy development, customer experience design, efficiency improvement, and business model (re)design.
Last week, amid complaints that the IRS had begun sending balance due notices to some taxpayers, even though they had already sent in checks with their tax filings for trusts and estates, the IRS updated its web page on IRS operations during COVID-19 with new information on pending check payments and payment notices, saying that the payments will be posted as of the date received, as opposed to the date when the IRS finally gets around to processing them. The IRS warned taxpayers not to cancel their checks in the meantime, as the IRS will eventually get around to processing them.
“If a taxpayer mailed a check (either with or without a tax return), it may still be unopened in the backlog of mail the IRS is processing due to COVID-19,” said the IRS. “Any payments will be posted as the date we received them rather than the date the agency processed them. To avoid penalties and interest, taxpayers should not cancel their checks and should ensure funds continue to be available so the IRS can process them.”
That should help taxpayers avoid interest and penalties, as long as the check hasn’t been canceled, or it doesn’t bounce.
“To provide fair and equitable treatment, the IRS is providing relief from bad check penalties for dishonored checks the agency received between March 1 and July 15 due to delays in this IRS processing,” said the IRS. “However, interest and penalties may still apply.”
The problem has been particularly acute for taxpayers who are filing Form 1041 estate and trust tax returns and receiving the balance due notices.
“As many advisers have discovered due to clients (especially trusts) receiving notices regarding payments supposedly due on tax returns where payments had been mailed in when the return was filed at July 15, the IRS is behind in processing items mailed to the agency and that includes certain tax payments,” wrote Ed Zollars, a partner in the CPA firm of Thomas, Zollars & Lynch, in a blog post for Kaplan Financial Education.
Besides being short on staff for opening the mail, the IRS is also dealing with the perpetual problem of answering its busy phone lines for taxpayers, and it recommended against calling the agency.
“Due to high call volumes, the IRS suggests waiting to contact the agency about any unprocessed paper payments still pending,” said the IRS. “See www.irs.gov/payments for options to make payments other than by mail.”
The current delays in mail service reported around the country may be exacerbating the backlog at the IRS as well. The recently appointed Postmaster General, Louis DeJoy, has come under fire for reforms this summer at the U.S. Postal Service like curbing overtime, prohibiting return trips to pick up undelivered mail, discarding high-volume envelope-sorting machines and removing mailboxes, resulting in slower mail delivery. DeJoy, a logistics executive and former finance chairman for the Republican National Committee, has also reassigned longtime executives at the USPS, leading to accusations that he is trying to sabotage mail-in voting ahead of the elections in November at the behest of President Trump, who has ramped up his criticism of states’ moves to allow universal mail-in voting in response to the coronavirus pandemic, claiming it would lead to voter fraud. House Democrats plan to return to Capitol Hill next week to vote on a bill to stop the changes at the USPS, at least until after the election, and have summoned DeJoy to an oversight hearing.
