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Tax Preparers Threatened over Tax Refund Delays

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New York (March 9, 2012)

By Michael Cohn, Accounting Today

Anxious taxpayers awaiting their delayed tax refunds are in some isolated cases taking out their frustrations on their tax preparers.

“Severe taxpayer frustration is generated due to the impact of delayed refunds and a lack of information on status,” said Bernie McKay, chairman of the Council for Electronic Revenue Communication Enhancement, in testimony on February 28 at a hearing of the IRS Oversight Board. His organization, CERCA, serves as a liaison between the Internal Revenue Service and the electronic filing industry.

“Such intense early season taxpayer frustration is directly related to the fact that significant numbers of early season return filers have the most urgent financial need for receipt of their tax refund to meet pressing household, personal or family bills,” McKay added. “For many of these taxpayers, the receipt of their annual tax refund is a major financial event which they and their families depend upon. When refunds are delayed and status information is not available or reliable, private sector tax call center staff suffer widespread verbal abuse from deeply frustrated taxpayers, while storefront associates have been physically threatened or even sustained personal property damage (e.g., rocks through car windshield).”

“We did not go into detail about specific incidents, but if you talk to any tax practitioner in the country, they will say that there were challenges that they had,” said CERCA spokesman Mike Cavanagh.

The IRS informed tax professionals early this tax season that it was experiencing tax refund delays as a result of new anti-fraud filtering software it had put in place to protect taxpayers against identity theft (see IRS Warns of Tax Refund Delays). The "Where’s My Refund" tool on the IRS Web site was also producing error messages and telling taxpayers different dates for when they could expect their refunds.

In the most recent update on the status of the tax refund delays, the IRS indicated that it was catching up, although it was still about 2 million tax returns behind where it was last tax season (see IRS Updates Status of Tax Refund Delays).

“The Where’s My Refund online tool needs to be continuously functioning, timely and accurate,” said McKay. “A lack of information, or the repeated unavailability or non-functionality of the tool itself, adds to the growing frustration of the taxpayer and directly drives growing call volumes for both the public and private sectors alike.”

At one point, when the Where’s My Refund tool was malfunctioning, the IRS asked taxpayers not to keep calling (see IRS Experiences Further Tax Refund Delay Problems).

But that put more pressure on tax preparers to answer the question for clients, CERCA noted. “The IRS posting of notices asking taxpayers to stop calling because it has no information does not help the problem, and does not produce the desired behavior within the impatient taxpayer population,” said McKay in his testimony. “If the taxpayer does indeed stop calling the IRS, they just start calling, emailing, texting, blogging or tweeting somebody else. A lack of information or customer service does not result in the taxpayer patiently going away and waiting. It is not a behavior that a dissatisfied consumer of services is accustomed to in the modern 24x7 world of instantaneous communications and constant access to desired information and services. A fundamental customer service paradigm shift has taken place in the commercial world, and the government sector is not immune from its impact.”

Besides the anti-fraud identity theft filters, some of the problems may have also been due to the IRS’s new Modernized eFile system (see IRS Software Glitch Delays Some Tax Refunds). The IRS told taxpayers that the refunds would be delivered within a 10-21-day window, but many tax refunds continue to be delayed, The Wall Street Journal noted Friday.

CERCA had seen this coming. “Despite years of public predictions of significant acceleration in refund cycle times due to major public investments in IRS systems, this year the IRS official guidance, and actual experience, was of a significantly longer refund cycle time than in the past,” said McKay. “Going forward, strategy must either align performance and management objectives back to the long-time predictions and commitments made to the public, or begin a major public re-education program to change public expectations about the timeliness of refund availability from the U.S. income tax system. The IRS Refund Cycle Chart has been out of synch this tax season with actual refund turnaround time, and out of synch as well with the IRS's own projection posted in January that lengthened the predicted amount of time it might take refunds to be processed to be 10-21 days. The disconnects in these types of critical datapoints add to taxpayer confusion and anxiety, and an objective for future seasons must be a standard of simplicity and consistency and timeliness in information and messaging.”

Even after the system indicated that the refund had been issued, the money oftentimes has not been forthcoming. “Once the IRS does issue the refund, the agency can today provide no further support to the taxpayer when researching where the refund actually is, and what happened, for example, with regard to offsets,” said McKay. “Tax practitioners and electronic service providers need access to [Financial Management Service] information to verify where disbursement is in the process, so that if there's been a problem with the funds they can be traced. Lack of timely, accurate, accessible information drives negative taxpayer experiences, particularly with early return filers who have the most urgent need to receive their refunds.”

CERCA wants to work with the IRS to improve the situation for next tax season.

“What we simply wanted to do was suggest solutions,” said Cavanagh. “Next year let’s work harder. The issues this season have happened, but let’s work with the IRS to do better.” He acknowledged that the problems from earlier this tax season are now abating. An IRS spokesman confirmed that the problems are mostly resolved at this point.

Electronic filers want to make sure that the situation improves in future tax seasons or elese it could upset the delicate balance involved with voluntary tax compliance.

“The role of tax refunds as an incentive for taxpayer voluntary compliance in the United States is foundational to the very high tax compliance rate the U.S. government has come to expect and enjoy over many decades,” said McKay in his testimony. “The role of tax credits as a lever of national economic policy has likewise become central to the role of the U.S. tax system in the American economy. If the timeliness of tax refunds is going to fundamentally change as the 'new normal' of American taxation, the taxpaying public must be informed and educated. Changing citizen expectations and behaviors took 10 years to produce a conversion from paper returns to electronic filing and achieving an 80 percent e-file rate. Changing citizen expectations about the timeliness of their access to their tax refund money would likely be a more difficult challenge that would encounter a more a challenging range of taxpayer behaviors and emotions, if this tax season is any indication.”

4 Comments

Couple this disaster with ptin fees,(which went from being good for 3 yrs to just 1 yr) and testing, etc. and the stuff congress pulls each yr and it's just a giant plot to eventually destroy the private tax prep business so that the IRS can take over and rake citizens across the coals with instant online / iPhone / kindle, etc. ill pre-prepared tax filings from them...

Posted by: taxking | March 12, 2012 2:39 PM

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More money each month to someone with out of control spending and no big refund check would more likely than not end up like the federal government - insolvent.

If you think this speed-up by the IRS bureaucracy to a 2- or 3-day refund cycle is fun, just wait until the IRS tries to prepare tax returns based on tax information documents that aren't always reliable.

Posted by: EnrolledAgent | March 12, 2012 1:44 PM

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Go to a reliable source quickly, if you're hunting for tax relief support. ConsumerTaxReports.org is a excellent one. It reviews a very long list of tax resolution businesses so that taxpayers have an easier effort locating the advisable option for their problem. The web link is http://www.consumertaxreports.com . I truly like precisely how they had top-secret shoppers make contact with these corporations and give an straightforward assessment. I burned many of time and money hunting for guidance. This web page would have protected that.

Posted by: Karenbright | March 12, 2012 1:10 PM

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ONE THING ALOT OF THESE TAX FILERS COULD DO ,WOULD BE TO ADJUST THEIR WITHHOLDINGS ON THE W2 SO THERE IS NOT SO MUCH WITHHELD. AND THEY WOULD HAVE THAT MONEY DURING THE YEAR TO LIVE . SOME OF MY CLIENTS HAVE TO "RUN UP THEIR CREDIT CARDS" DURING THE YEAR BACAUSE THEY FIND THEMSELVES "RUNNING SHORT OF MONEY" BECAUSE THEY HAVE WAY TO MUCH WITHHELD DURING THE YEAR. AND THEY LOOK FOR THAT "BIG CHECK" TO HELP THEM GET CAUGHT UP FROM THE YEAR BEFORE ( CREDIT CARDS)BASICALLY BREAK EVEN . THIS HAPPENS YEAR AFTER YEAR. THEN THEY GET INTO THE COMPETITION OF WHO GETS THE BIGGEST REFUND AT WORK OR WITH THEIR CIRCLE OF FRIENDS. IT'S VICIOUS CYCLE THEY GET INTO .THE EITC PEOPLE THAT'S A DIFFERENT STORY. WHY THE GOVERNMENT DID AWAY WITH THE ADVANCED PAYMENTS I WILL NEVER KNOW. FRAUD PROBABLY. AS A SMALL BUSINESS OWNER WE TRY TO PREACH TO OUR CLIENTS ABOUT "OWING" FEDERAL ABOUT 250.00 AND THE STATE ABOUT 100.00 ON APRIL 15(NORMALLY)INSTEAD OF GETTING THAT " BIG CHECK" AND HOW THAT WILL AFFECT THEIR LIFE DURING THE REST OF THE YEAR. THE CLIENTS FIRST LOOK AT YOU LIKE YOUR CRAZY UNTIL THEY ACTUALLY SIT AND LISTEN AND LET IT SOAK IT. LOW AND BEHOLD THE LIGHT COMES ON. THEY FINALLY SEE THE VICIOUS CYCLE THEY ARE "FIND THEMSELVES IN ". ON A SIDE NOTE WE HAD A COUPLE THAT WERE GETTING A DIVORCE BECAUSE OF "MONEY PROBLEMS". THEY HAD NO MONEY TO PAY THE MONTHLY BILLS. THESE PEOPLE MADE OVER 100K A YEAR, NO KIDS, JUST THE TYPICAL SCH A DEDUCTIONS. THEY WERE GIVING THE GOVERNMENT PER MONTH NOW OVER 800.00 EXTRA . AND THEY DIDN'T KNOW "WHERE ALL THE MONEY WAS ALL GOING" . AND OF THEY WOULD GO AT EACH OTHER ABOUT THIS, AND WE SEEN THIS FIRST HAND. TRIED TO TELL THEM FOR YEARS TO CHANGE THIS BUT THEY ALWAYS HAD AN EXCUSE OF CREDIT CARD DEBT TO PAY OFF. THEY WERE ALWAYS BEHIND. THEY CAME IN THE YEAR OF THE DIVORCE AND WE ASKED THEM THAT IF THEY HAD THIS "EXTRA"(THEIR MONEY) TO PAY THE BILLS PER MONTH WOULD THEY BE GETTING A DIVORCE ?? THEY STOPPED ALL THE FIGHTING AND LOOKED AT EACH OTHER AND HAD A "COME TO JESUS MEETING" RIGHT THEN AND THERE. THEY FINALLY ADMITTED THAT WAS THE ONE OF THE MAJOR PROBLEMS THEY HAD. WE FILLED OUT THE "NEW" W4 AGAIN( AND HAD TO FOLLOW UP)FOR EACH OF THEM TO TURN INTO THE COMPANIES AND LOW AND BEHOLD THEY HAD MORE MONEY TO "PAY THE BILLS EACH MONTH". IT JUST MAGICALLY APPEARRED FOR THEM. YOU HAVE TO EDUCATE YOUR CLIENTS ON HOW TO FIGHT THE MAIN STREAM OF SOCIETY ( THE HUGE REFUNDS STIGMA) ON A DAILY BASIS, BUT ONCE THEY SEE THE STUPIDITY OF LETTING THE GOVERNMENT SPEND "THEIR MONEY" AND THE BENIFITS OF MANAGING THEIR MONEY THE CORRECT WAY, A MAJOR PORTION OF THEIR LIVES COMES INTO FOCUS. I LOVE TO SEE THE LIGHT COME ON.

Posted by: tazman1963 | March 12, 2012 11:07 AM

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