IRS Sends Erroneous Notices to Natural Disaster-Affected Taxpayers
In a not-so-surprising turn of events, the IRS has created further confusion among taxpayers affected by natural disasters. Despite being eligible for delayed tax return filing and payment deadlines, many individuals are receiving erroneous CP14 balance due notices, claiming that payments are due and that interest and penalties will be charged if the taxpayer doesn’t pay up months earlier than IRS guidance permits. While the IRS apologized for the confusion, the problem has extended beyond California, impacting taxpayers in several other states. Let’s delve deeper into the matter and explore what steps the IRS is taking to rectify the situation.
The initial apology issued by the IRS acknowledged the confusion caused for California taxpayers and tax professionals. The IRS reiterated that affected taxpayers in California had an automatic extension to file and pay their taxes, dismissing the payment deadline mentioned in the collection notices. However, the problem has escalated, with taxpayers in Alabama, Arkansas, Florida, Georgia, Indiana, Mississippi, and Tennessee also receiving these erroneous notices. In response, the IRS announced that a “special follow-up” letter will be sent to taxpayers in these states, reiterating the extended payment deadline.
In an announcement, IRS Commissioner Danny Werfel expressed the organization’s dedication to enhancing operations as part of their new Strategic Operating Plan. Recognizing the confusion caused, the IRS swiftly sent out a follow-up reminder to reassure affected individuals. Additionally, the IRS has updated the insert that accompanies future CP14 balance-due notices to clarify that the listed payment date does not apply to taxpayers covered by a disaster declaration.
According to the National Taxpayer Advocate, Erin M. Collins, the issuance of Notice CP14 is mandated by IRC § 6303(a), which requires the IRS to send a notice and demand for payment within 60 days of assessing a tax. The notice includes a payment deadline since the IRS doesn’t charge interest if the tax liability is settled within a specific timeframe. However, due to the postponed payment dates for disaster-affected taxpayers, the IRS’s outdated systems failed to generate notices reflecting the revised deadlines.
Collins suggests that if the IRS must continue to send erroneous balance-due notices, they should prominently display a clear statement on the first page, explicitly stating that the notice is being sent to fulfill a legal requirement. It should emphasize that taxpayers residing in disaster areas have until the date specified in the disaster declaration to settle their tax liability, without incurring interest charges or penalties if paid by the postponed date.
The IRS’s error in sending wrong collection notices to taxpayers affected by natural disasters has caused unnecessary confusion and stress. While some steps have been taken to fix the problem, more needs to be done to communicate effectively with those affected. By improving messaging and updating systems to reflect postponed payment deadlines, the IRS can provide a smoother experience for taxpayers facing these challenges. It is now up to the IRS to improve their processes and offer clear guidance to alleviate the burden on affected taxpayers.