A continued backlog of returns at the IRS and accounting changes related to the COVID-19 pandemic promise to make this tax season a challenging one. With the 2021 tax return deadline ahead of us on April 18, 2022, PYA has compiled some important information to keep in mind.
Taxpayers should expect delays this year in processing returns and refunds, particularly for returns that are not filed electronically. The IRS currently has a backlog of more than 6 million unprocessed individual returns and 2.3 million unprocessed amended returns dating back to 2019. Budget constraints and pandemic challenges have led to understaffed IRS call and processing centers. Incorrect automated compliance notices have been sent to taxpayers, causing confusion, with few phone or mail resources available to resolve the issues. Electronically filing a tax return with direct deposit or debit of funds will help mitigate some of the processing delays.
Taxpayers who received an Economic Impact Payment in January 2021 will receive a letter from the IRS showing the amount received. This letter will help them calculate the Recovery Rebate Credit. Incorrect calculations will lead to a delay in processing tax returns. Taxpayers who received an Advanced Child Tax Credit Payment will also receive a letter with a total amount to help in calculating the Child Tax Credit. More information about both letters can be found in this IRS post.
If you have received a notice from the IRS, contact your Client Service Executive at PYA immediately to begin the resolution process. PYA staff are seeing delays of up to six months to resolve some of these issues. Many of the professional tax organizations PYA is affiliated with, such as the American Institute of Certified Public Accountants (AICPA), have successfully advocated through Congress for a temporary stop to many automated IRS notices, including balance due notices and unfiled return notices. The IRS has indicated they will continue to assess other changes to assist taxpayers during this time. Our firm will continue to monitor this situation.
It is important to know that taxpayers with a delinquent balance due will continue to accrue penalties and interest until the balance is paid in full, whether a notice is received or not. Do not delay making payments or responding to any IRS notice received. The IRS has indicated they will still send notices in select circumstances to resolve specific compliance issues.
Automatic six-month extensions can be granted until October 15, 2022. We encourage taxpayers to consider this alternative, as the IRS continues to navigate the aforementioned challenges.
If you have questions about your 2021 tax return, have received a notice from the IRS, or if you would like assistance with any matter involving tax preparation, audit and assurance, business advisory, or regulatory compliance, one of our executive contacts would be happy to assist. You may email them below, or call (800) 270-9629.