IRS Suspends Issuance of Collection Notices to Taxpayers

The COVID-19 pandemic has continued to create a significant backlog in the processing of returns and there are still over one million original and amended tax returns that have not yet been fully processed.

Given the backlog in processing returns, the IRS has suspended the issuance of automatic collection notices to taxpayers. Examples include:

• On February 9, 2022, the IRS announced the suspension of mailing taxpayers automated collection notices normally issued when a taxpayer has an unpaid balance due or has not filed a tax return.
• On October 13, 2022, the IRS reiterated that “most collection enforcement programs, including the systemic and automated lien and levy programs, and automated levy programs such as Federal Payment Levy Program and the State Income Tax Levy Program are currently paused.” During the summer of 2022, the IRS also announced that they were aware that they erroneously issued thousands of balance due notices to taxpayers who made payments towards their 2021 tax liability.

After issuing these notices, the IRS discovered many taxpayers had already made payments toward their 2021 tax liability, but some of those payments were not applied correctly. So, not only were tax payments misapplied, but the IRS also issued notices to taxpayers of an unpaid balance due, even though the IRS had received payment.

What if I paid my 2021 tax liability in full?

If taxpayers have paid their 2021 tax liabilities in full, the IRS advised taxpayers to not respond to the IRS’s erroneously issued notices.

What if I have an unpaid balance?

For taxpayers with unpaid balances due, the mailing suspension does not stop interest from accruing. Therefore, taxpayers will want to be in filing compliance and make payments towards their tax liabilities.

What if I can’t pay the balance due in full?

There are several payment options available to taxpayers if they cannot pay the balance due in full. If they cannot make any payments to the IRS, the IRS will require their financial information to verify that after their basic necessary monthly living expenses are paid, there is nothing left to pay towards their tax liabilities and will place the account in currently non-collectible (CNC) status.

What if the case is assigned an IRS revenue officer?

Suspension of enforced collections does not apply if a taxpayer’s case is assigned to an IRS Revenue Officer. A Revenue Officer’s job is to collect any unpaid balances due.

If a Revenue Officer is assigned to the case, they can issue a Federal Tax Lien to protect the government’s interest should an asset be sold or refinanced. The IRS Revenue Officer can also issue levies including but not limited to:

• a bank levy
• wage garnishment,
• any other levy against various income sources such as an accounts receivable levy, etc.

Therefore, a taxpayer should respond to the Intent to Levy notices and Notice of Federal Tax Lien Filing (NFTL) and contact a tax professional for assistance to help them navigate the collection process.

What happens next with the IRS delays?

Once the IRS gets through the backlog of processing original and amended tax returns, the IRS will start issuing collection notices again. The collection notices start with a balance due notice, then escalate to Intent to Levy notices and NFTL which will be sent via certified mail. Should a taxpayer receive certified mail from the IRS, we recommend they seek the advice of a tax professional.

The Eide Bailly Tax Controversy and Procedure team can assist with all types of IRS disputes, resolutions and collections.

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