IRS urged to stop sending notices for unpaid taxes until it catches up on mail backlog

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Rep. Richard Neal, D-Massachusetts, who chairs the tax-writing House Ways and Means Committee, is asking the Internal Revenue Service to quit mailing notices for unpaid taxes to taxpayers who may have been affected by the mail backlog at the agency due to the COVID-19 pandemic.

Many taxpayers have been receiving balance-due notices from the IRS even though they sent in their tax payments to the IRS months ago, because trailers full of mail have remained unopened since the start of the pandemic. This spring, as many IRS offices were shuttered, a backlog of millions of pieces of unopened mail accumulated in trailers set up outside agency 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.

Last week, the IRS said it would post the payment as of the date it was received rather than the date when it was finally processed, but taxpayers shouldn’t cancel the checks they have sent, as the IRS slowly processes the mail in order to avoid interest and penalties (see story). As opposed to sending out the erroneous notices, Neal suggested the IRS set up an online portal for taxpayers to let the IRS know they previously mailed in their tax payments. He also urged the IRS to make sure taxpayers aren’t charged any penalties or interest for the agency’s delay in processing their payments.

“IRS officials reported that, due to office closures, the IRS has accumulated a staggering backlog of unopened mail,” Neal (pictured) wrote in a letter Wednesday to IRS Commissioner Charles Rettig. “At one point this summer, the IRS had approximately 12 million pieces of unopened correspondence in its inventory. Despite this unprocessed mail, the IRS reportedly has been sending notices to taxpayers whose correspondence and payments remain unopened. Therefore, many of the taxpayers receiving these notices already have made the payments that the IRS seeks.”

The backlog has likely been exacerbated by the slowdown in mail delivery due to changes by the new Postmaster General, Louis DeJoy, a former Republican National Committee finance chairman who ordered cuts in overtime, mail-processing equipment, return trips for mail delivery, and mailboxes shortly after taking over the U.S. Postal Service this summer as states ramp up their efforts to expand mail-in voting for the elections. Amid a national outcry and a congressional probe, DeJoy announced Tuesday he would suspend such changes until after the November election. However, he stopped short of promising to reverse the changes, and reports persisted of mail-sorting equipment and blue mailboxes continuing to be removed around the country Wednesday.

The problems with the IRS backlog date back before DeJoy’s appointment in June, as the IRS was forced to close most of its offices this spring in the midst of tax season as the coronavirus spread across the country. While many employees have returned to work at the IRS, the mail continues to accumulate. Still, Neal would like the IRS to stop sending out the notices when there is still so much uncertainty about what taxes have been paid by check and are sitting in unopened envelopes.

“These notices impose unnecessary stress on taxpayers who, upon receipt, must contact the IRS for assistance,” Neal added. “This is particularly troubling at a time when the IRS is telling taxpayers who need to call the agency ‘to expect long waits due to limited staffing.’ Taxpayers reaching out for assistance on the telephone must hope someone can answer their call and that all payments they have made have been opened, processed, and indicated on their account. Certainly, any additional correspondence generated by these notices can prove difficult for the IRS to handle and cause significant delays for taxpayers seeking fair resolution.”

He would like for the IRS to wait until the volume of unopened mail subsides to a more manageable level.

“The IRS should not resume sending notices to taxpayers until the backlog has been reduced to pre-pandemic levels and taxpayer accounts have been updated,” Neal wrote. “At such time, the IRS should carefully review any notices before sending to ensure that they are correct and timely and that taxpayers are in no way being penalized for the delay … . The IRS should not make its backlog problem a taxpayer problem.”

Last week, 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.

“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.”

Neal wants the IRS to waive any interest or penalties and to halt the alarming notices.

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IRS Coronavirus Tax debts Richard Neal Charles "Chuck" Rettig
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