Penalties Still Apply After IRS Ends Scary Tax Notices
During the wild 2022 tax season, there are have been more surprises than ever. As a result of a backlog of tax returns, the IRS will no longer send certain notices to taxpayers, particularly letters advising of unfiled tax returns or overdue tax payments.
According to CNET, The end of scary IRS letters will be welcomed by some taxpayers, but other citizens who owe taxes or are required to file a previous year’s tax return may not find out about the situation until it is too late, as interest and penalties accumulate.
What prompted this change? Due to an unprocessed tax return or payment, the IRS does not wish to confuse taxpayers with outdated or inaccurate notices. Although the IRS will no longer issue collection notices, taxpayers who owe money or returns to the IRS are still expected to fulfill their obligations.
Here’s what you need to know about suspended notices this year and what it means for taxpayers.
What is the Reason Behind IRS Not Sending Certain Notices?
There are a record number of unprocessed tax returns and payments due to the COVID-19 pandemic and IRS staffing issues. This processing backlog caused the IRS to send some inaccurate automated letters.
The IRS announced on Jan. 27 that it would suspend CP80 notices, which alert taxpayers of unfiled tax returns. Senators and Representatives called on the IRS a few days after the tax filing deadline of April 18 to suspend automated collection practices until at least 90 days afterward. On Feb. 9, the IRS announced it would suspend the 15 notices below. Until the backlog of IRS letters is cleared, the letters will not be sent.
What IRS Letters Have Been Suspended?
When taxpayers owe money or do not file required returns, the IRS sends automated collection notifications. The IRS is pausing the mailing of dozens of notices until the backlog of returns has been cleared to avoid confusion.
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This list includes:
- CP80: Unfiled tax return > IRS credited payments to the taxpayer but hasn’t received a tax return.
- CP59/CP759: Unfiled tax return, first notice > No record of a prior year return being filed.
- CP516/CP616: Unfiled tax return, second notice > Request for information on a delinquent return.
- CP518/CP618: Final notice, return delinquency > Final reminder notice when there is no record of a prior year(s) return filed.
- CP501: Balance due, first notice > There’s an outstanding balance on a taxpayer’s account.
- CP503: Balance due, second notice > the Second reminder there’s an outstanding balance.
- CP504: Final balance due notice, third notice, intent to levy > A payment has not been received for an unpaid balance.
- 2802C: Withholding compliance letter > Sent to taxpayers who have been identified as having under-withholding of federal tax from their wages.
Also, there are business notices the IRS is pausing.
- CP259/CP959: Return delinquency > There’s no record of a prior year return being filed.
- CP518/CP618: Final notice of return delinquency > Final reminder notice of no record of a prior-year tax return.
Are Taxpayers Affected By This Change?
In order to reduce stress and confusion resulting from potentially inaccurate letters, the IRS has decided to suspect automated collection notices. Those who file tax returns and tax professionals will surely be relieved by the end.
Although these tax notices will not be suspended, taxpayers who actually need to file their previous year’s return or pay their owed tax balance will not be helped. For those who have unfulfilled filing requirements or owe back taxes, the IRS emphasizes that “interest and penalties will continue to accrue” in its press release on Feb. 9. The interest accrues daily on penalties and balances owed to the IRS.
Is It Possible That You Will Still Receive a Letter?
In view of the IRS’ recent decision to stop sending these automated notices, it is possible that you may still receive one of these letters in the mail. The IRS stated that one doesn’t need to call or respond to the notice since it’s working to “process prior-year tax returns as quickly as possible.” So, If you already filed your taxes and you receive a notice saying they haven’t been received, the letter is likely to be out of date.
The IRS encourages every taxpayers to promptly pay any unpaid taxes if they receive a notice telling them that they owe taxes but didn’t file a previous year’s tax return.