Processing Delays Within the IRS Generates Balance Due Tax Notices

Aug 28, 2020

The Internal Revenue Service and State tax departments have experienced delays in tax return processing due to the COVID-19 pandemic. A current delay in the processing of payments received is affecting both Individual and Trust income tax filings. Taxpayers across the country have received tax notices from both the IRS and State tax departments that are citing tax amounts due with penalties and interest tacked on even though the taxpayers timely paid the tax amount due with their filings. Situations have occurred where the payment due was electronically withdrawn or check cashed, but the payment has not been applied to the account appropriately. Other situations have occurred that the payment check was received by the taxing agency but not yet cashed. Either way – the tax payments being applied to these accounts have a definite lag time. The lag time, however, was not stopping the tax departments from sending out balance due notices.

On August 21, the IRS posted an update on their website about these notices and that they are suspending future mailings until they have caught up on processing the mail and payments they have received. In addition, they will be providing penalty relief for any dishonored checked that they’ve received from March 1 to July 15 due to the processing delays. While the policy to suspend these future mailing has been put in place, there could still be mailings that were sent out prior to this policy that are still moving through the USPS system.

What Should You Do if You Received One of These Notices?

  • Let your tax preparer know if you’ve received one of these notices so they are aware of the situation.
  • Make sure you have documentation of the payment that you made. It should equal the balance the notice is showing due before penalties and interest. If this is not the case, your tax preparer can assist with looking into the variance for you.
  • If you sent the payment via certified with return receipt, hold onto the receipt records.
  • Finally, closer to the due date of the notice unless the IRS has released additional guidance, either the tax preparer with a valid Tax Power of Attorney or the taxpayer should call the tax agency to confirm the payment is finally applied to the account and nothing further is due.

The tax departments are currently inundated with phone calls and their call centers are not able to keep up with the volume. Our advice would be to give time for them to apply the payments and for the departments to clear up their processing delay.

Categories: COVID-19, Other Resources