Taxpayers are often frustrated by the lack of communication from the IRS. This was only exacerbated during the COVID-19 pandemic, as the IRS temporarily stopped sending automated reminders for overdue tax bills starting in February 2022. The IRS announced this week that they will provide $1 billion in penalty relief due to this interruption in communication. This will be done mainly through waiving the failure-to-pay penalties. The IRS estimates 5 million tax returns from individuals, businesses, trusts, and nonprofits are eligible for this penalty relief. National Taxpayers Union applauds this move by the IRS at acknowledging their issues in communication and hopes that this will represent the IRS turning over a new leaf when it comes to customer service.
NTU President Pete Sepp issued the following statement:
The estimated $1 billion in penalty relief is not only a matter of fairness for taxpayers who haven't heard from the IRS about their taxes due for quite some time. It is also a smart move over the long term for sound tax administration. By acknowledging reality and taking responsibility for a hiatus in communication, the IRS is creating a better customer service relationship with taxpayers that will likely lead to many billions more in higher tax compliance in years to come. Success of this initiative, however, will also depend on additional improvements in outreach, better training of employees to provide responsive service, and a commitment to taxpayer rights from leadership at the agency are needed as well. This concept can work in many IRS settings if applied with vigor, including global settlement initiatives and supervisor approval for penalties.
NTU has long held that the IRS must better serve taxpayers and be overall more responsive to taxpayer requests and inquiries. The Service regularly falls behind on processing tax returns and has even urged taxpayers not to call or contact them to check on the status of their returns, as it uses up what little bandwidth the Service has to respond with little update. While this penalty relief is promising, serious reform is still necessary for the IRS to truly benefit taxpayers. One solution to many of the IRS’s woes that NTU suggests is reallocating some of the $80 billion in funding from the American Rescue Plan Act towards goals like technology modernization and customer service rather than to enforcement to squeeze even more money from taxpayers. If the IRS wants to increase tax compliance in the coming years, more reforms must be made, but this penalty relief is a decent starting point to acknowledging and remedying the Service’s shortcomings.
If you would like to speak with NTU President Pete Sepp on the IRS’s penalty relief and reforms the Service should make, please contact NTU Vice President of Communications and Outreach Kevin Glass at 703-683-5700 or kglass@ntu.org.