IRS Commissioner Charles Rettig offered a webinar recently providing updates on the most Frequently Asked Questions (FAQ) regarding the state of the IRS right now.
Most notably, the Commissioner discussed the great need for the IRS to move into the 21st Century of technology. Noting the IRS is far behind the times when it comes to technology updates, Commissioner Rettig shared the unpreparedness of the department for a pandemic environment.
Like many organizations that switched to remote work environments during 2020 with the onset of the pandemic, the IRS closed offices and trimmed down its personnel in office spaces significantly. While the focus was kept on answering phone calls from taxpayers, per the Commissioner, the average call time during the pandemic increased by nearly four minutes a call.
This, combined with decreased staff and increased tax law changes such as the economic impact payments and change in unemployment taxability meant that fewer calls from taxpayers could be addressed per day, resulting in the increased wait times and difficulty getting through that has also frustrated most preparers this tax season. Increased call times and decreased staff meant the processing of paper files took a backseat leading to the backlog.
The Commissioner provided good news for tax preparers and taxpayers alike with the continued announcements of IRS hiring plans to catch up on backlogs. In addition, Commissioner Rettig intends to continue to focus on technological advances for the department and taxpayers.
Updates also came on dealing with recovery rebate credits and the continued delay in refunds as reconciliations of the payments have found themselves mixed into the backlog. The IRS updated its Frequently Asked Questions page regarding the recovery rebate credits.
Keys to note for taxpayers as you are preparing returns, the IRS “will not” correct tax returns that claim their rebate credit was $0 in 2021. Per the FAQ page, the IRS will assume a $0 on the schedule, even if inadvertently entered, means the taxpayer is forgoing the receipt of any recovery rebate credit.
Writing in the wrong amount received on the return could delay any refund the taxpayer is waiting on while the IRS reconciles the real payment amounts.
Also updated in the FAQs page is the note the IRS will adjust for changes in eligibility for the credit and/or dollar amounts for taxpayers whose adjusted gross income was impacted by unemployment income exclusions where applicable. A helpful addition to the process for taxpayers who may have been eligible for more credit than they received, however, not a significant enough change to resolve the headaches caused during tax season.
The Commissioner provided good news for tax preparers and taxpayers alike with the continued announcements of IRS hiring plans to catch up on backlogs.
To summarize the most recent updates, the best we can continue to do as preparers is put in the due diligence to reconcile recovery rebate payments prior to filing returns. For firms not currently fully utilizing the IRS’ online tools, based on the Commissioner’s most recent update, updating your processes will be a good step forward toward improving efficiency.
As the IRS continues to focus on utilizing technology, expect more delays in old school methods of paper and phone.
To review the current IRS Modernization Plan, click HERE.
Tools that will be coming include web apps, integration with tax processing software for real-time data updates on returns, call-back options when waiting to access IRS phone lines, and real-time processing. Start now by encouraging your clients to sign up for an ID.me account to be able to access their tax account information online as the IRS continues to work toward putting more information on taxpayer portals.
Find a tool like Canopy’s IRS API integration to capture tax transcripts for your clients electronically, and make sure your information is up to date and on file with the CAF unit to be able to call in and utilize powers of attorney efficiently.