The government should announce any extension of the deadlines by March 1 to give taxpayers enough time to plan, the American Institute of Certified Public Accountants said in a letter dated Tuesday. And if the administration decides to extend the deadline, it should push it back to June 15 to allow states enough time to make conforming changes, the letter said.
"Taxpayers and tax professionals need certainty by March 1 to ensure there will be decision-making time leading up to the tax filing deadline," the AICPA said.
The accountant group also asked the agencies for tax penalty relief, and said the IRS and the U.S. Department of the Treasury should halt collection activities for at least three months after this year's tax deadline.
The AICPA's recommendations come after IRS Commissioner Chuck Rettig said Tuesday that the agency had no plans to extend the April 15 deadline, despite calls from Democratic lawmakers to push back 2020 tax filing and payment in light of the pandemic.
While Treasury moved last year's deadline to July 15 because of the pandemic, Rettig said that his agency doesn't "see a need to extend the filing deadline," and that an extension could instead sow confusion.
Filing is off to a slow start this year, according to Democrats on the House Ways and Means Committee, who said in a recent letter that the IRS processed 14 million returns one week into this year's filing season beginning on Feb. 12. That's a decrease from the 40 million processed through Feb. 14 last year, according to their letter.
This abbreviated tax filing season is one of several factors that are complicating tax filing this year and warrant deadline certainty from the IRS, the AICPA said in its Tuesday letter. Others include difficulty accessing taxpayer data and a dearth of guidance on various coronavirus relief programs and how they should be accounted for in 2020 returns, the group said.
While Rettig has rejected characterizations of the tax filing season as condensed, the National Society of Accountants also told the agency recently that the Feb. 12 start date could compromise tax filing. The agency normally opens the filing season in January, but said it needed to conduct additional programming and testing for its systems this year.
The AICPA also argued Tuesday that the IRS should suspend its collection activities until at least 90 days after tax filings and payments are due this year in light of the premature and erroneous notices sent to taxpayers. Erroneous tax due notices — sent by automated systems at the IRS that failed to account for new deadlines— have caused confusion for people and businesses, the AICPA said.
"Taxpayers are still inappropriately receiving collection notices or threatening liens or levies, often with severe penalties," the group said.
These erroneous collection notices include a batch of around 260,000 missing tax return notices that the IRS sent to people at the beginning of February who may have actually filed their 2019 returns, as well as premature tax-exempt revocation notices the IRS sent to some nonprofits in 2020 because its systems couldn't account for tax filing extensions.
Despite some assurances that taxpayers who receive certain notices don't need to take any action, the correspondence has been alarming and "taxpayers are understandably concerned about the escalation of inappropriate IRS compliance activities," the AICPA said.
"The IRS must provide taxpayers relief from the endless cycle of unnecessary and inappropriate notice and collection activities," the letter said.
The IRS has fielded a request from Rep. Bill Pascrell Jr., D-N.J., the chairman of the House Ways and Means Oversight Subcommittee, to suspend penalties that could be tied to the agency's delivery of incorrect tax due notices.
Also among the AICPA's recommendations were that the IRS and Treasury provide relief from penalties for underpaying taxes or not paying them on time. Some people may have not withheld taxes on their unemployment benefits, while others may hesitate to meet with tax professionals in person to turn over data needed to accurately compute payments, the AICPA said in a separate letter dated Feb. 16 that was released Tuesday.
Mail backlogs at the U.S. Postal Service also might have led to missing tax documents, which could in turn lead to inaccurate tax preparations that risk the accrual of penalties, according to that letter. The IRS itself had a mail backlog from the pandemic in 2020, which it cleared this year.
Despite the busy tax season, Rettig has said the agency is ready to send a potential third round of coronavirus impact payments included in President Joe Biden's $1.9 trillion pandemic relief legislation. The AICPA said that delaying tax deadlines to June 15 because of a third round of direct payments would give the IRS time to process the roughly 6 million returns that remain from the 2019 tax year.
Treasury and the IRS did not respond to requests for comment.
--Additional reporting by David van den Berg, Joshua Rosenberg, Dylan Moroses and Stephen Cooper. Editing by Tim Ruel.
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