The Internal Revenue Service said Friday it would restart issuing its 500 series of balance-due notices to taxpayers later this month after they were paused on May 9 due to the COVID-19 pandemic.
While the IRS continued to issue most of its notices, the 500 series was temporarily suspended because of a backlog of mail that built up at the IRS while many employees were away from agency facilities due to COVID-19. The IRS came under fire earlier this year for issuing balance due notices with the incorrect dates to taxpayers during the pandemic and agreed to stop sending the notices until it caught up with its backlog of unopened mail (see story).
Gregory A. Bocchino, partner – tax at KPMG LLP, is the national leader of KPMG's Accounting Methods and Credits practice and has more than 20 years of federal income tax accounting methods and credits experience.
Ajay Wanchoo, managing director – tax at KPMG LLP, leads transformation initiatives with a global team of specialist engineers and business experts and contractors, who provide deep technical analysis of client IT investments and develop client-facing solutions in the cloud leveraging artificial intelligence and other emerging technologies.
Joshua Ronen is a professor of accounting at New York University Stern School of Business and co-editor of the "Journal of Law, Finance, and Accounting." Professor Ronen teaches courses in managerial accounting, financial accounting, advanced topics in financial accounting, and financial statements analysis. Ronen has been with NYU Stern for nearly 45 years. His primary research areas include capital markets, disclosure, earning management, economic impact of accounting rules and regulations, financial reporting, legal liability of firms, transfer pricing, agency theory, corporate governance, and fair valuation. Ronen has written numerous books including "Accounting and Financial Globalization," "Off-Balance Sheet Activities," "Entrepreneurship," "Smoothing Income Numbers: Objectives, Means and Implications," and "Earnings Management." He has been published in many academic journals including and publications including The New York Times, The Accounting Review, Journal of Accounting Research, Journal of Accounting, Auditing and Finance, Abacus, Management Science, Journal of Public Economics, Journal of Organizational Behavior and Human Performance, Stanford Journal of Law, Business, and Finance, and Journal of Financial Markets. In addition to his work at NYU Stern, Ronen has lectured at University of Canterbury, Tel-Aviv University, Federal University of Rio de Janeiro, National University of Mexico, University of Toronto, University of Chicago, Hebrew University, and London School of Economics among many others. He has also been a consultant for numerous organizations, including especially law firms as expert witness in the area of securities litigation. His suggestions for reform in the accounting profession have received critical acclaim by legislators and in the media. Ronen received his Bachelor of Arts in Economics and Accounting at Hebrew University in Israel, and his Doctor of Philosophy from Stanford University. Professor Ronen is also a licensed CPA in Israel.
The IRS said Friday that it has now caught up enough with its mail backlog to account for payments that are mailed on a timely basis. Some taxpayers will start seeing updated 500 series notices with current issuance and payment dates in late October or early November.
The 500 series of balance due notices includes three different types of notices that warn taxpayers about different stages of nonpayment: the CP501, the CP503 and the CP504.
The CP501 notice tells taxpayers they still have a balance due and what their options are, while the CP503 lets them know the IRS hasn’t heard from them yet and they may be subject to a tax lien if they don’t pay their taxes. The CP504 alerts taxpayers they need to pay their balances immediately or face the possibility of a levy of their state income tax refunds. The 500 series of notices are typically sent to taxpayers if they don’t respond to or pay their initial notice and demand on the CP14 letter.
Despite the resumption of the notices, the IRS is still in the process of catching up on millions of pieces of unopened mail, prompting a letter this week from Democrats on the House Ways and Means Oversight Subcommittee asking if the IRS will be ready in time for next tax season (see story). They also asked the IRS this week about why it was sending out notices revoking the tax-exempt status of over 30,000 nonprofits despite an extension it was supposed to have granted them for filing the Form 990 during the pandemic while it’s in the midst of processing the backlog of unopened correspondence. Earlier this month, IRS Commissioner Chuck Rettig told another House oversight subcommittee that the IRS was still processing 5.3 unopened million pieces of mail, including 2.5 million paper tax returns.
The IRS is encouraging taxpayers who can’t pay to consider some of the available payment options while penalties and interest continue to accrue.
The IRS noted that taxpayers who were affected by the pandemic or other circumstances may qualify for relief from penalties due to reasonable cause if they’ve made an effort to comply with the requirements of the law, but couldn’t meet their tax obligations, due to facts and circumstances beyond their control. Taxpayers should call the toll-free number listed on their notice to ask for penalty relief due to reasonable cause if they believe they qualify and have the supporting documentation to prove it. More information on reasonable cause relief can be found on a page at IRS.gov. Payment options and extra information can also be found on another page of IRS.gov.
