The IRS like many other organizations rely upon software and systems in order to properly operate their business. With so much variety of work in processing new returns, e-filing, audits, collections, criminal investigations, and handling customer service, the IRS is often pulled in many directions. Shutting down this machine to update systems is not often an option, but sometimes a necessity to keep it operating through most of the year. We now are upon this critical precipice, beginning November 26, 2022, the IRS will commence its annual maintenance.
Tax Compliance: E-Filing
The IRS is able to accept e-filing of tax returns for the current and past two filing years. That means as of this publications of this article, 2021, 2020, and 2019. All other years must be mailed in paper returns. More recently, the IRS has also allowed amended returns to be e-filed as well. In order to prepare for the upcoming tax season, the IRS annually shuts down its e-filing systems for months. As mentioned above, this date is arriving this weekend. During this period, the normally accepted e-filing years have to either wait to be e-filed or have to mailed in instead. This annual maintenance is often referred to as an “e-filing shutdown” and is set to resume in early 2023, lasting normally roughly two months.
Delay in Processing
The downside to this annual maintenance is the lag that it creates. During the pandemic period, the IRS has struggled to quickly process tax returns, especially those mailed in. The time difference between a mailed in return versus an e-filed return processing is more than four months. Practitioners are now met with a dilemma of efficiency. Is it better to wait to e-file or to mail in a tax return in order to achieve compliance quickest and serve their clients’ end. With so much catch up and priority on the newest years, this concern becomes loudest for past due older years such as 2019 and 2020.
Collections
Another upcoming annual overhaul is the unspoken collections pause the IRS customarily takes from mid December to the beginning of the new year. While the IRS doesn’t like to publicize that collections are on hold, this necessary and holiday treat often goes unnoticed. The pandemic again threw a wrench at IRS collections as normal collection actions have been paused since 2019. The assumption for practitioners is that the revival in January that normally occurs might be a prime opportunity for normal ACS collections to commence again and normal notice letters to restart. It seems less likely to turn that faucet on just to turn it off again, or to “skip” the break period to start normal procedures first.
With the upcoming annual slowdown, and looming collections, compliance should be at the forefront of all taxpayers behind on their filings. Not sure of your compliance or where to start? Give us a call 800-822-4122 to learn what the best first foot forward should be. We can help.