IRS Fails Taxpayers Again in 2015

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Based on the interim report published by the Treasury Inspector General for Tax Administration (TIGTA), the IRS achieved a 38.5 percent Level of Service and a 24.6 average hold time on IRS phone lines during the 2015 filing season.  I don’t really know what Level of Service entails, but I know that 38 percent is really only good if we’re talking batting average.  You may be wondering, “How do you get such a low score?  I could probably score higher than 38 percent on a test by guessing.”  Well, this is how: you get 45.6 million phone calls and you answer only 4.2 million of them.  BAM.  Done.

Read the report.  It will make you cringe.

Changes Announced for PPS Phone Line

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Now I know why the hold times are so long when I call the IRS.

Some people think tax attorneys have a special dedicated phone line at the IRS and we can simply pick up and talk to whomever we want whenever we please.  This couldn’t be further from the truth.  Yes, we do have a special practitioner phone line, but during peak call times I don’t think it makes much of a difference, at least not lately.  The IRS Practitioner Priority Service (PPS) phone line has, in my opinion, never been the same since the government shutdown in October 2013.

The IRS recently announced some changes to PPS.  The IRS says that effective January 6, 2014, they will only be able to help tax professionals with tax questions through the PPS phone lines.  You have to be kidding me!  Isn’t this the whole point?!  What this means to me is that I have consistently been waiting on hold for an hour each time I call because the IRS Practitioner Priority Service number phone reps have been taking calls from non-practitioners with irrelevant questions!  This is beyond annoying.

This is all a little tongue-in-cheek because I think what the IRS really means is that PPS reps are going to be checking to see if the practitioner has a valid Power of Attorney on file for the account they want to discuss before answering long-winded questions that have nothing to do with specific taxpayer issues.

Also, the service is no longer going to honor live telephone transcript requests.  This makes sense because there are so many other ways to obtain transcripts such as through the automated phone service, irs.gov website, and by mail.  There is no sense in clogging up the practitioner phone lines with unnecessary requests.  I wonder if the hold times will get any shorter after January 6th.  One can only hope.

IRS Asks for Patience

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The IRS issued an “Operations Resumption Statement” last week on its website after opening its doors back up on October 17th.  The IRS wants taxpayers and tax professionals to know that that they are aware of the backlog that has resulted from the 16-day shutdown:

At this point, we know we received a large amount of correspondence during the closure. We know there will be a substantial increase in demand for our phone services and many other operations

In other words, “stop reminding us about the delays and long hold times; we know we have problems right now.”

The IRS also acknowledged that it will take time for the call centers and walk-in assistance centers to ramp up to normal levels of operation.  Since they are still assessing the damage caused by the government shutdown, there is no way to estimate how long the ramping up process will take.  I would guess that things will be slow for several weeks, perhaps even a couple months.  This is based on my experience as a tax attorney over the years.  Even one day off at the call centers often has residual effects on hold times and mail processing times.  A 16-day shutdown is unprecedented and we have no way of knowing when the IRS will be back to “normal” at this point.

In light of the enormous backlog that the IRS has committed to focus on over the next several weeks, the IRS has asked that taxpayers and tax professionals delay or limit their contacts with the IRS except in urgent situations.  Of course, after 16 days many of the issues that could have been considered non-urgent have now been upgraded to higher levels of urgency.  And I think the IRS realizes that too.  They just ask for our patience right now.  Ask anyone who deals with the IRS on a regular basis — if there is anything we know, it’s patience.

Government Shutdown: Residual Effects on IRS

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The effects of the “government shutdown” have been far-reaching and I’m certain we will feel the effects for months to come, even if everything is switched back on soon.

In IRS world, even one day off tends to cause residual delays and bottle-necks.  For example, when the IRS observes a national holiday and shuts down on a Friday or a Monday, the work tends to pile up, making it more difficult for taxpayers to get help for the following couple business days.  This is especially true in the IRS call centers where they have little control over work flow.  A salaried employee, such as an IRS revenue officer, can put in extra time before a day off so that work doesn’t pile up too much.  But the work flow of an hourly call center employee is more dependent on the volume of inbound taxpayer phone calls.

The IRS always experiences high call volumes on Mondays and days following holidays because IRS problems don’t just go away on their own.  If you can’t get through to the IRS on one day, you’ll probably try again as soon as possible.  And I don’t feel like the IRS hold times have ever really recovered to what they once were before the IRS began furloughing employees earlier this year.  But now we are talking about an unprecedented closure of several days in a row (and how many more, we do not know).  I would not be surprised if the residual effects of the IRS shutdown are felt well into 2014.

It's always "hurry up and wait" with the IRS

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It’s always “hurry up and wait” with the IRS.

The Offer in Compromise (OIC) process is a perfect illustration of this point. If a taxpayer finds himself with a tax debt that he cannot pay, one of his options is to file an Offer in Compromise by which he offers to settle with the IRS for less than what he owes. But the IRS will require that the OIC be filed as soon as possible; in fact, the IRS collections department will be poised to levy income sources if the offer is not filed (or some other resolution entered into). It is important to inform Collections of your intention to file an OIC, but they will most likely give you a short due date by which to submit the paperwork.

Once the OIC has been filed, then the waiting begins. It commonly takes several months just for the IRS to assign an offer to be reviewed. Offer examiners have to keep an eye on their caseloads because once a case enters their inventory, they are required to move it along promptly.

When an offer examiner or offer specialist has finished reviewing the offer, things pick back up and the taxpayer has to stay on his toes. Once again, deadlines are given that, if missed, could mean the end of the road. During this period of review the deadlines are typically attached to the submission documents that are required to substantiate details in the personal financial statement.

Once all the information is in and a determination has been made, there is usually additional waiting. The case normally must be submitted to a manager for further review, and that can take some time.

With the coming sequestration and IRS staff furloughs on the horizon, it is likely that the contrast between the hurrying and the waiting will be more pronounced. The IRS has said that furloughs will not begin until after tax season — that’s when we can expect longer-than-normal waiting periods at all levels of the IRS as there will be fewer IRS employees on duty to help.

Blytheville: Meet the IRS

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photo via adam-ross.com

Blytheville – a small town in Mississippi County, Arkansas.  Population 15,620.

Definition of blythe:

  1. of a happy lighthearted character or disposition
  2. lacking due thought or consideration

Blytheville appears to have been appropriately named, at least with regard to it’s tax obligations.  But the city still deserves to be treated fairly and still deserves IRS’ best efforts.

The city owes an undisclosed amount (somewhere in the millions of dollars) in back payroll taxes, and its tax attorneys are working with the IRS, trying to establish an installment agreement. The city put into place a temporary local sales tax to raise revenue for the back IRS tax debt, but the IRS will not accept the money directly.  For now, according to the IRS, funds must go through Blytheville bank account first.  Also, the IRS has not accepted the city’s installment agreement proposal.  City officials are beyond frustrated by how difficult the IRS is making things for them:

This seems to make no sense and is contrary to their own best interest….It’s amazing to see how something so simple is being made so complicated….[T]he IRS has even made receiving money complicated.

~ Blytheville Mayor, James Sanders

I love the innocence and honesty of this quote.  This is obviously a “first impression” situation.  I am also appalled by how the IRS tends to make things more complicated than necessary, I just no longer find it surprising.

The IRS' Daily Routine

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photo via champagnedentalblog.com

What are some of the things you do on a daily basis?  Brush your teeth, check your email, read a favorite book?  Even though it may not be apparent to most of us, the IRS actually has a daily routine too: processing tax returns.

But this wasn’t always so.  Before 2005 the IRS operated on a weekly processing schedule.  In other words, what showed up in IRS computer systems could be out of synch with what was sitting on somebody’s desk for up to a week at a time.

TIGTA recently audited the IRS’ daily return processing performance with favorable results.  However, it is still a work in progress; there are certain tax returns with “qualifiers” (or codes) that prevent daily processing.  Some of the qualifiers include:

  •  identity theft
  • bankruptcy
  • pending litigation
  • Offer in Compromise pending
  • Currently Not Collectible status
  • underreporter issues
  • tax return adjustments

Coincidentally, the presence of some of these same disqualifying factors are also what tend to hold things up on the collections side of things when seeking tax relief.

IRS Blunders

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I knew it would be a mistake to call the IRS a couple of days before Tax Day, but I was already on the phone with the IRS and I really wanted to get some other things done.  One of my ancillary tasks that day was to request a 2011 tax return transcript for a client.  The first thing I noticed was the complete lack of urgency on the part of the IRS representative.  This is the busiest time of the year for the IRS, but I didn’t get a sense of that from this employee!  I spent nearly 30 minutes with this guy and all I wanted was a simple transcript.  I’ve had a bank levy released more quickly than that.

Eventually he informed me that the 2011 tax return had not been processed yet, so there was no transcript available for 2011 and he would be unable to process my request.  I thanked him for his help and ended the call.

Then, to my surprise, today I received the transcript in question via U.S. mail — it is a two-page letter.  The first page contains standard information about what a transcript is and is not.  The second page shows the taxpayer’s social security number as well as the tax form and tax period in question.   And where the details would normally go, there is the simple phrase: “No record of return filed.”

I didn’t ask for this.  We both agreed that the transcript was not available yet.  But somehow I received a completely unnecessary two-page letter.  That’s the IRS for you…

TAS No Longer Taking Simple “Delay” Cases

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The Taxpayer Advocate Service (TAS) — that independent organization within the IRS whose mission it is to assist taxpayers — announced that it no longer has the manpower to assist taxpayers where the only complaint is IRS delay. Taxpayers must go elsewhere for real tax relief.

TAS groups its cases into two broad categories: (1) Economic Burden and (2) Systemic Burden. They will continue to handle all Economic Burden cases, but the following “systemic burden” issues will be remanded to the IRS:

  1. Processing of Original Returns
  2. Unpostable/Rejected Returns
  3. Processing of Amended Returns
  4. Injured Spouse Claims
According to the TAS, delays associated with these 4 issues are typically due to the IRS being overloaded with work. And the way they see it, it makes no sense to push the problem off on them, who are also overloaded with work. So, the TAS will temporarily not be helping taxpayers with these specific issues. Of course, a systemic issue could be causing (or about to cause) an economic burden, and in that case, the TAS will hear it. Full details here.

Offer in Compromise: The 24-month Rule

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The IRS has 24 months from the date that anOffer in Compromise is received to make its decision.  If the IRS does not accept, reject, or return the offer within 24 months, then it is deemed accepted  (IRM 5.8.8.6).  According to IRS policy, “The timeliness of case actions in an offer investigation is important not only to ensure the efficiency of the process but also is a key component of taxpayer satisfaction”  (IRM 5.8.1.2).

But lets face it, the Offer in Compromise process can be lengthy and the IRS has never been very good with taxpayer satisfaction.  It routinely takes several months just for the IRS to mark the offer as received and assign it to an Offer Examiner.  And that’s only the beginning of the process.

I have never seen the 24-month mandatory acceptance provision come into play.  Certainly the responsible IRS employee(s) would be disciplined, if not fired, for letting the 24-month period expire.  My problem with the 24-month rule is that it does not have the intended effect.  In fact, it seems like it is quite the opposite.  An astute IRS representative with a caseload he can barely keep up with will probably delay as long as he can, even though the entire process could easily be completed in 30-60 days.