IRS PAYMENT & PENALTY PROBLEMS

[Lee B]

"The report, from the Treasury Inspector General for Tax Administration, also found that the processing delays caused by the closure of the IRS’s Tax Processing Centers in April 2020 led to the service assessing numerous incorrect failure-to-pay penalties (211) and incorrect estimated tax penalties (1,256).

TIGTA also noted that systemic payment processing limitations also caused problems: IRS systems can only process payments received within the last 30 days, but when TPCs were reopened in June 2020, many payments already exceeded that limit, and the IRS did not revise that limit until October 2020 – because it did not realize that it could.

ACCOUNTING TODAY

"The backlog of returns, correspondence, and other types of work resulting from the pandemic has and will continue to have a significant impact on the associated business taxpayers," the report indicated.

The report suggested that the backlog could have been reduced by have more payments redirected to IRS lockbox sites; most payments already do, but over 6.9 million payments worth more than $37.6 billion went through TPCs in 2020.

TIGTA recommended that the commissioner of the IRS Wage and Investment Division correct the inappropriate penalties, and look into the possibility of sending more payments to lockbox sites.

The IRS agreed with both recommendations, and said that it had begun making corrections to the incorrect penalties, and had updated its lockboxes to be able to process additional notices. It did note, however, that it would not be possible for payments received in field offices to be directed to lockbox site."