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Daily Tax Report: State

IRS Closures, Service Cutbacks Turn Tax Queries Into a Struggle (1)

April 7, 2020, 4:00 PMUpdated: April 7, 2020, 6:11 PM

Aspects of the IRS’s pandemic response are making it nearly impossible to reach the agency by phone or mail, hampering individuals and tax advisers trying to resolve issues not covered by a recent enforcement freeze.

The agency has had to cut back operations significantly to protect employees from catching and spreading Covid-19. The changes have severely crippled the agency’s phone capabilities and forced closures or staff reductions at facilities across the country, including at centers used to process paper returns and forms.

This at a time when the IRS’s workload is larger then ever—not only is the agency in the middle of a filing season that will last an extra three months, but it has been tasked with processing millions of one-time stimulus payments.

Steps the IRS has taken, like easing some enforcement actions, should reduce the number of reasons taxpayers would need to seek help. But other processes that are still active and require interaction with the agency have become very challenging, and at times nearly impossible, practitioners told Bloomberg Tax.

“There’s simply no one to contact,” said Patrick W. Thomas, an associate clinical law professor and the founding director of Notre Dame Law School’s Tax Clinic. The facility closures and curtailed services are especially bad for low-income taxpayers who resolve most of their issues at IRS campuses, he said.

The IRS said Tuesday in an emailed statement that many of its operations are on hold because of Covid-19 but that the agency is transitioning more employees to telework. In the interim, it asked taxpayers to reference information posted to its website or reach out to their local taxpayer advocate office for direct assistance.

Existing Levies

Many taxpayers and their advisers are confused about what recent IRS announcements mean for ongoing levies—such as those taking money from a taxpayers’ wages or bank account to cover tax debts—issued prior to the Covid-19 outbreak.

The IRS is temporarily suspending new levies issued by field collection employees and by its automated collection system. It is also suspending some automated programs entirely, including the Federal Payment Levy Program, which allows the IRS to seize a portion of certain payments a person receives from the government, according to an internal memo issued late last month.

But existing levies not explicitly mentioned in those declarations are a gray area. “Employees should expeditiously handle release of levy decisions on a case by case basis under existing guidance, being mindful of the taxpayer’s situation,” the memo said.

Practitioners said they’re unsure what exactly that language means—whether it indicates the IRS plans to automatically review current levies and decide whether to suspend them in situations, for example, where taxpayers have lost their jobs due to Covid-19, or if taxpayers need to initiate a review in order for the IRS to make any changes.

Taxpayers should contact the IRS through the revenue officer assigned to their case or by reaching out to their local taxpayer advocate office if an already-enacted levy is creating a hardship situation, the IRS said Tuesday.

Aisha N. Servaty, assistant supervising attorney and director of the low-income taxpayer clinic at Mid-Minnesota Legal Aid in Minneapolis, said she’s tried contacting her local taxpayer advocate office on behalf of her clients to discuss existing levies but hasn’t been able to reach anyone.

Discharging Liens

Another problem area: discharging tax liens, which give the IRS a legal right to property owned by a person who has failed to pay a tax debt.

The IRS has said it won’t issue new liens now but that it will continue to release existing liens, where appropriate. That includes processing discharge applications, which remove the lien on a property so that the owner can sell it and pay taxes owed out of the proceeds of the sale.

Robert E. McKenzie, a former IRS revenue officer and partner at Saul Ewing Arnstein & Lehr LLP in Chicago, said he recently had a client who couldn’t close a sale because the person was waiting for the IRS to discharge a lien.

“We had difficulty just getting a hold of somebody to help us out,” he said.

The IRS said Tuesday that applications submitted electronically are being processed normally and assigned within 10 days. Applications mailed to the agency’s advisory consolidated receipts site in Florence, Ky., however, aren’t being processed because the site currently lacks mail service, the IRS said. The agency requested that taxpayers use the e-fax line for that site listed in Publication 4235.

The problem that many practitioners and taxpayers are facing is that they don’t know who to call now if they need help expediting a process, like removing a lien, or resolving issues they’re having, McKenzie said.

The IRS in late March told tax professionals it was shutting down many customer service phone lines, including its practitioner priority service line, due to staffing limitations. Call centers across the U.S. have also closed and general live phone assistance is currently not available, according to an IRS webpage last updated April 3.

Processing Paper

Actions involving mailed correspondence and the processing of paper returns and forms are also limited, according to practitioners.

On an IRS webpage updated at the beginning of this month the agency said it can still receive mail but its responses to paper correspondence will be very limited. People who mail in documents should expect longer-than-usual response times, and even after normal operations resume the agency will have to work through a backlog, the IRS said.

That’s created anxiety for taxpayers and their representatives.

“What’s happening with my mail? And is it ever going to get to the right department?” Servaty said. “That’s my concern.”

The delays can impact audit reconsiderations—where taxpayers challenge the result of an IRS audit—and refund claims—where a taxpayer requests reimbursement for taxes already paid. The IRS has said it will continue to work refund claims where possible.

“Interaction with correspondence exam is quite difficult or impossible,” said T. Keith Fogg, who directs Harvard Law School’s Federal Tax Clinic. A correspondence exam is an audit conducted entirely by mail.

Fogg said his understanding is that all or almost all of the correspondence examiners have been sent home and aren’t working remotely.

The IRS said at the end of March that it generally wouldn’t start new correspondence examinations during this time, with a few exceptions. The agency also said in-person meetings to discuss open exams are suspended but that employees will continue to work the audits remotely, where possible.

Servaty said she has clients involved in ongoing correspondence exams who haven’t received anything from the IRS in weeks—she recalled the last response coming at the end of February.

(Updates with IRS comment beginning in sixth paragraph. )

To contact the reporter on this story: Allyson Versprille in Washington at aversprille@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com

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