The IRS no longer has semitruck trailers full of mail on site like it did several months ago, De Lon Harris, the deputy commissioner for examination at the IRS' Small Business/Self-Employed Division, said during the Federal Bar Association's annual tax law conference, held online. But some mail at agency locations in cities such as Austin, Texas; Kansas City, Missouri; and Ogden, Utah, is still taking about two weeks from the date of receipt to process, according to Harris.
"For instance, we are opening mail on a same-day basis in Fresno, [California], but in Austin, Kansas City and Ogden, it is more likely we will open it and extract that mail about two weeks from the date that we receive it," he said.
In Kansas City and Ogden, where business returns are processed, the IRS has seen an increase in receipts that has mainly been due to the quarterly return due dates that fall at the end of January and beginning weeks of February, Harris said.
In Austin, the IRS had to shut down for an entire week due to the snow and ice that accumulated during the recent unseasonably cold weather, he said.
"That's why those centers are a little more behind in opening and extracting mail," Harris said.
The IRS is currently dealing with a backlog of work from 2020, since many employees were not on the campuses, but now there are new receipts for the current filing season that are coming in, he said.
The agency's goal is to process all the incoming tax year 2020 refund returns as they are received for filing season, but resources are also being dedicated to processing the current backlog for returns received last year, Harris said.
Alina Solodchikova, a principal at RSM US LLP, said during the meeting that the processing delay is affecting those who filed a Form 1139 to take advantage of changes to net operating losses, which falls under Section 172
of the Internal Revenue Code.Before the Tax Cuts and Jobs Act
was enacted in December 2017, net operating losses could be carried back for up to two years or carried forward at 100%, but only for up to 20 years. After the TCJA, companies could no longer carry back NOLs in tax years after 2017, but could carry forward NOLs indefinitely at 80%. However, the Coronavirus Aid, Relief and Economic Security Act changed the rules to again allow NOLs arising in 2018, 2019 and 2020 to be carried back up to five years.The Form 1139 allows for a corporation to apply for a tentative refund for an NOL claim and should take about 90 days to process, but it is taking the IRS about six to eight months to process them, Solodchikova said. And returns for 2018 and 2019 must be amended to take advantage of the statutory changes, she said.
Harris said the IRS is working through the backlog by putting additional workers on the line to address the issue.
While the Form 1139 covers a tentative refund for corporations, the Form 1045 is the application for a tentative NOL refund for an individual, estate or trust.
Previously for NOL claims, the IRS had accepted the Form 1139 and Form 1045s via fax from April 2020 through December 2020 while service centers were closed, Harris said. But as people returned to the service centers in December, the IRS closed those fax lines, he said.
"We don't have any plans to reopen those fax lines right now," he said. "But we have increased the number of employees, like I said, [who are] assigned to work those CARES Act-related refund cases, so that's where we are."
--Editing by Neil Cohen.
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