IRS update: Incremental improvements

July 12, 2022 12:12 PM

The Internal Revenue Service is making many small improvements in its processes and capabilities, at least according to the recently released June 2022 Tax Update from the National Conference of CPA Practitioners. The update covers 2022 filing season processing, direct deposit on prior-year returns, Small Business/Self-Employed updates, bots and AI, the Nationwide Tax Forums, and retirement plan pre-examination compliance, according to Stephen Mankowski, tax chair of NCCPAP.

2022 filing season roundup from a processing perspective

An IRS office building in the East Harlem neighborhood of New York

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This year has been extremely successful for those filing electronically, according to Mankowski. While there’s still a lot of work to do, autocorrection of errors has allowed the IRS to stay on top and close cases.

Hiring is still a major initiative for the IRS. Almost 4,700 offers have gone out,and so far, about 1,400 individuals have been onboarded. The IRS also expects to hire 2,500 temps to help fill the gap.

Last year, Error Resolution System cases were taking about 40-50 days to process; now they only take about three days, even when some need manual closing. Paper returns cannot be rejected; however, they can be digitized and processed through the Modernized e-File System. In addition, the IRS is considering 2D bar coding, but needs to determine a way to process those returns.

Direct deposit on prior-year returns

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Since June 2021 the IRS has implemented a program to add direct deposit. This year, 1.2 million direct deposits were issued, which is about 22% of all returns.

Taxpayers can now file 1040X returns electronically not only for the current year, but also for the two prior years. Also, “Where’s My Refund?” is now also available for three years.

Small Business/Self Employed update

Sign in front of IRS building in Washington, D.C.

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The Small Business/Self-Employed Division is working on the backlog and is analyzing workflow to help make decisions regarding notices, Mankowski reported. They are working more closely with the Wage & Investment Division.

The IRS returned to field activities at the end of June 2022 for revenue officers (for unannounced visits) and revenue agents. There is some skepticism regarding unannounced visits, but the officers will show pocket credentials that can be verified. Most taxpayers will have received mailed notices in advance.

Federal tax deposit alerts also started at the end of June 2022. Some taxpayers will get unannounced visits related to FTD alerts, but they will now have a direct point of contact within the IRS. Nearly 1,000 employees from SB/SE have been delegated to work through the backlog.

Non-filer notices were stopped earlier this year, as were automated liens and levies. There is no certain date as to when they will be resumed. However, the IRS's Automated Collection System function issues both on a case-by-case basis, and in the field revenue officers have continued to issue both.

Update on bots and AI

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The IRS is exploring the ability to permit bots to execute payment agreements. The IRS is open to exploring whether streamlined installment agreements via bots could expand from $25,000 up to $50,000 without direct debit requirement, according to a spokesperson, but no commitment has been made.
Automated Collection System bots have answered over 4 million calls since January through July 8. In addition, 1.6 million text chats have aided taxpayers. Since mid-June, the IRS has been using artificial intelligence to approve installment agreements without errors since mid-June. It is expected that, if the bots can handle the backlogs, they will greatly increase the level of service and open up some assisters to handle more detailed cases.

“If a taxpayer gets into a bot and is confused, they can hit a button and get back into their spot in the queue,” said Mankowski. “These have enabled the IRS to close a lot of issues.”

CP14 Notice

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The CP14 is a balance due notice on unpaid taxes. It requests payment within 21 days. A different channel of the IRS will soon be available to address these notices. Unauthenticated bots can help inform taxpayers how to make a one-time payment, and authenticated bots can establish streamlined payment plans up to $25,000. In late July, 2022, the authenticated bot will be able to provide a transcript, and by late September 2022 it will be able to provide details of balances due.

Nationwide Tax Forums

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The IRS 2022 Nationwide Tax Forums will be held virtually beginning July 19, 2022, with a series of live-streamed webinars every Tuesday, Wednesday and Thursday. Held each summer for more than 30 years, the forums are the IRS’s marquee outreach event to the tax professional community. Over 8,000 registrants have already signed up to attend — registration is still open.

New retirement plan pre-exam compliance pilot

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The IRS Employment Plans office regulates the tax side of retirement accounts. They continue to look for ways to enhance compliance. Since examinations are the costliest means of compliance, there is a pre-exam compliance pilot underway in which cases are identified and allowed voluntary corrections. The program began last month, and allows the taxpayer a 90-day window to demonstrate compliance or correction. Cases can be closed without the necessity of sending an agent to the taxpayer.