As the Internal Revenue Service tries to go through a slew of unprocessed returns from previous years, collection warnings to some Americans who haven’t submitted their forms are still sent. The computer system can’t figure out why it didn’t get a response.
The IRS sends out collection notices and adds interest and penalties to the account balance.
Automated Underreported Notifications Sent
According to MSN, Erin Collins, a national taxpayer activist, the IRS took way too long to review taxpayer replies to its letters, delaying payments and, in some cases, resulting in premature collection notifications, which impacts low-income Americans. In addition, she chastised the IRS for initiating collection measures before a taxpayer’s answer to a problem reported by the agency had been reviewed.
The IRS, for example, sent 14 million automated under-reporting notifications and 14 million math error warnings (where an amount noted on a tax return is different on the amount note on Form 1099 to the IRS). Also, notifications to verify a taxpayer’s identity and collection notices to taxpayers, according to the report released by Fox Business.
Massive Backlog
According to the information, a backlog of about 5 million taxpayer correspondence had been reported to the IRS as of late December, with some of these entries dating back to at least April. Of course, no taxes, penalties, or interest will be required if the IRS is mistaken. However, for individuals who owe money, a lengthy and costly process of resolving the debt can be distressing and expensive. From the due date to the payment date, interest is usually charged on the amount outstanding.
According to IRS statistics, more than 50% of individual audits in fiscal 2019 were conducted on taxpayers with total earnings of less than $50,000. The vast majority of them (82%) were from people claiming the earned-income tax credit to help them avoid poverty.
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