Important Information About IRS Tax Notices

Over the past few months, taxpayers who have sent payments to the IRS have still been receiving balance due notices. This is due to an IRS backlog in processing mail because of COVID-19 related closures. In response to a letter from the chairman of the House Ways & Means Committee, the IRS is working to temporarily suspend certain balance due notices to avoid confusion for taxpayers. Three kinds of follow-up notices (CP501, CP503, and CP504), which are sent automatically to individuals who do not respond to an initial notice (CP14) will be suspended for the time being. Such notices may still be received in the following weeks, however, due to mailings which were already in transit at the time of the suspension.

The IRS has said they are making significant progress in going through their mail backlog and will continuously monitor the situation to assess when notice mailings will resume.

The IRS still recommends promptly responding to the original CP14 notice.  Taxpayers can request that a collection hold be placed on the account, pending processing of any payments sent. Taxpayers should also be sure not to cancel any checks which were mailed and should be certain that funds are available in their bank accounts until these payments are processed. The IRS has previously stated that payments will be deemed received on the date they arrived, instead of the date they were actually processed. In addition, the usual IRS penalty for dishonored checks will be waived for checks received between March 1 and July 15.

Another announcement made by the IRS recently was regarding erroneous payroll tax notices.  Payroll deposits on Form 941 were correctly reduced by many employers to account for COVID-19 related tax credits, such as the sick and family leave or employee retention credits. However, in certain scenarios, liability schedules did not equal the decreased deposits for every pay date. As a result, penalties were assessed, and failure-to-deposit notices were sent. The IRS is attempting to pinpoint taxpayers who received such notices to resolve the penalties and is working to suspend further notices from being mailed out. The IRS has stated that, in these situations, no further action is necessary at this time.

Questions? Contact us at covid19relief@hertzbach.com.