Tips for working effectively with the IRS

Editor: Uzell T. Freeman-Williams, CPA

The past two years have been tough on the profession, with repeated rounds of new legislation and fresh IRS guidance, sometimes with convoluted procedural processes.

Additional tension has stemmed from dealing with continued delays as the IRS has grappled with the aftermath of its campus shutdowns, reduced personnel, and the infamous backlog of paper returns and correspondence. Delays in live phone support, answering mail from taxpayers, reviewing paper returns, and processing payments —— among other issues —— all resulted from challenging circumstances.

National Taxpayer Advocate (NTA) Erin M. Collins called 2021 “the most challenging year taxpayers and tax professionals have ever experienced” in her Annual Report to Congress released in January 2022, summarized in an executive summary and IRS news release. The report details what Collins identifies as the 10 most serious problems encountered by taxpayers in 2021:

1. Processing and refund delays;
2. IRS recruitment, hiring, and training;
3. Telephone and in-person service;
4. Transparency and clarity;
5. Filing season delays;
6. Online accounts;
7. Digital communications;
8. E-filing barriers;
9. Correspondence audits; and
10. Collection.

The NTA report highlights that the IRS’s backlog, as of mid-December 2021, consisted of:

• 6.2 million unprocessed individual returns (Form 1040, U.S. Individual Income Tax Return);
• 2.8 million unprocessed business returns (Form 941, Employer’s Quarterly Federal Tax Return);
• 2.4 million unprocessed amended individual returns (Form 1040-X, Amended U.S. Individual Income Tax Return);
• 427,000 unprocessed amended business returns (Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund); and
• Approximately 4.75 million pieces of general taxpayer correspondence.

Following the NTA report, several members of Congress sent letters calling for action to address the IRS’s backlog of unprocessed tax returns as the 2022 tax season began.

Additionally, a coalition of 11 stakeholder groups from the tax practitioner community urged the IRS to take steps to reduce unnecessary burdens for taxpayers and practitioners during the 2022 filing season. Joining the AICPA in this action were Latino Tax Pro, National Association of Black Accountants, National Association of Enrolled Agents, National Association of Tax Professionals, National Conference of CPA Practitioners, National Society of Accountants, National Society of Black CPAs, National Society of Tax Professionals, Padgett Business Services, and Prosperity Now.

On Jan. 27, the IRS announced that it was suspending certain automated letters in recognition of the possibility that the return was in fact filed but had not yet been processed. Subsequently, on Feb. 9, the IRS announced that it was suspending additional letters and notices.

Practical tips

Given the many challenges practitioners face in terms of IRS services, here are some practical tips to maximize service to clients:

• Encourage clients to register for an Online Account where they can view the amount they owe, verify the amount of any economic impact payments (EIP) received, make and track payments, and view payment plan details.
• For clients who receive advance child tax credit (CTC) payments, continue to request Letter 6419, 2021 Total Advance Child Tax Credit Payments (one for each spouse for joint filers), that details the amount of advance payments received. Although the letter will be accurate for most taxpayers, in some instances it may not include the correct number of payments or amounts. The taxpayer’s online account can usually be used to verify its accuracy. Also, authorized representatives can reconcile amounts using their client’s transcripts.
• Prepare an executed Form 8867,Paid Preparer’s Due Diligence Checklist, for each client who received advance CTC payments, even if the credit amount ultimately reported on the 2021 Form 1040, U.S. Individual Income Tax Return,is zero. Consider using the AICPA Tax Section’s Paid Preparer’s Due Diligence Checklist, which is one of the many tools contained in the Annual Tax Compliance Kit.
• Remind individual taxpayer clients that they can check the status of any refund using the Where’s My Refund? tool. The status is available within ٢٤ hours after the IRS accepts their e-filed tax return or up to four weeks after the taxpayer mailed a paper return. The tool updates once every 24 hours so taxpayers only need to check once daily.
• Follow up with the IRS after 60 days if a response to correspondence is not received. Also, make sure you have the proper IRS authorization to address your client’s issues (see the AICPA Tax Section’s IRS third-party authorization guidance). Although the IRS is opening mail within normal time frames, processing such correspondence remains delayed.
• When filing an amended return, recommend that clients include a check payable to the U.S. Treasury for $1 along with the corrected return. Apply the check to the tax and period of the amended return and attach a cover letter with the return and check. The cashed check will be proof of the receipt of the response. Note that the Taxpayer Advocate Service (TAS) is not assisting with amended return issues. However, TAS points to the IRS tool Where’s My Amended Return?
• Confirm that you are registered for e-Services to receive transcripts through a secure mailbox. Refer to the AICPA Tax Section’s Using IRS e-Services page.
• Inform clients who are in the collection process that they may get a call from a revenue officer (RO) following a series of mailed notices. Advise clients to request verification of the RO’s identity and to refer the RO to their authorized tax representative. Consult the AICPA Tax Section’s IRS collection guidance and resources.
• Document all contact with the IRS, including the name and identification number of all IRS personnel who are contacted.

For further tips, see Wolfe, “A Guide to Dealing With Today’s IRS,” 53 The Tax Adviser 26 (January 2022).

New ID verification procedure

The IRS has launched a new process for users to verify their identity and sign in to IRS online tools and applications. To provide verification services, the IRS is using a third-party technology provider, ID.me. Because reliance on the company’s facial-recognition technology has led to some controversy over privacy concerns, the IRS announced that it will move away from mandating the use of third-party facial-recognition technology to authenticate the identities of people creating new online accounts and offer an alternative option in which taxpayers will verify their identity in a live, virtual interview with an IRS agent. Taxpayers will still have the option to verify their identity automatically through the use of biometric verification using ID.me’s self-assistance tool if they choose, and the IRS is committed to ensuring that images provided by taxpayers are subsequently deleted for the accounts being created. The new process was developed under the Secure Access Digital Identity (SADI) initiative and complies with a federal mandate.

Using the new mobile-friendly verification procedure, taxpayers can gain entry to IRS tools and applications such as Get Transcript Online, Get an Identity Protection PIN (IP PIN),and Online Account. Tax professionals can access applications such as Tax Pro Account.

Users of the old system can log in to these tools with their current credentials until the summer of 2022. However, system messages will prompt them to create an ID.me account as soon as possible.

ID.me allows individuals to prove their identity by using documents such as:

• Driver’s license;
• U.S. passport;
• Federal or state government-issued ID;
• Student ID; and
• Other nonfinancial records.

ID.me provides its own customer service and offers an ID.me IRS Help Site to assist users with the authentication process.