When the COVID-19 pandemic began, it impacted every aspect of modern society. The Internal Revenue Service (IRS) and its core functions were not immune and had to adapt to the challenges of COVID-19.
For the IRS, the COVID-19 era brought employee sequestration, extended processing times for many of its core services, as well as an administrative freeze on its collection enforcement activities. In response to these challenges, the IRS relaxed many of its tax filing and payment requirements, including collections enforcement for the 2021 and earlier tax periods.
Beginning in late 2023, the IRS introduced new initiatives to address its reduced service levels during the pandemic and increase tax scrutiny on high-income individuals, partnerships, corporations and promoters. These initiatives will bring a resumption of collections enforcement, new audits and heightened reporting requirements. Additionally, the IRS is deploying the funding it received as part of the Inflation Reduction Act to add additional employees, modernize many of its systems, increase its ability to quickly process returns, and expand its collections enforcement. The impact of these initiatives will be felt by individuals and businesses on an increasing basis over the next decade.
If you have been contacted by the IRS or have reason to believe that contact is imminent, there are several things you can do now to prepare to address your tax issue.
- File any missing tax returns as soon as possible and make any estimated payments when they are due. The IRS will not consider any settlement options until you are filing and payment compliant.
- Open any mail from the IRS right away. The notices sent to you from the IRS contain a wealth of information. They will tell you why the IRS is contacting you, what it might need to resolve your case, and often provide deadlines to meet. Failure to timely review these notices can have long term or permanent repercussions on when and how your case can be resolved.
- Begin gathering any information you may need to respond to the IRS as soon as possible. Many people do not realize how difficult it can be to locate documentation used for tax returns from prior years. Getting organized now will make the whole process far smoother in the future.
- When responding to the IRS, be sure to keep records to prove when and what was sent along with any notices. In addition to fax confirmations, mail should be sent as certified or registered with tracking. The IRS is a very large agency that receives millions of pieces of mail every week. Don’t miss a key deadline because your submission never arrived at the IRS, and you have no way to prove that it was sent.
Regardless of whether the IRS has already contacted you or you have reason to believe that contact is imminent, there are things you can do now to prepare to resolve your case. By following these easy steps, you can put yourself in the best position to respond to the IRS and reduce the overall impact of any outstanding tax debt.
The next few years will bring a large amount of change at the IRS. These changes in include increases in staffing and enforcement, the modernization of systems, and increased scrutiny for several classes of taxpayers. By taking a proactive approach to your tax filing requirements, you can get a jump on these initiatives today.
Contact a tax attorney for additional information on these changes and the options available to address any tax issues with the IRS or the state.
Written by Joseph A. Peterson
Joseph A. Peterson
Senior Attorney
38505 Woodward Ave., Suite 100
Bloomfield Hills, MI 48304
T: (248) 433-7158
F: (248) 901-4040
jpeterson@plunkettcooney.com
