Their US Treasury checks were cashed almost a year ago. But taxpayers say they are now receiving letters from the Internal Revenue Service asking them to file their 2020 federal income tax returns immediately.
Yes, copies of their 2020 returns. Yes, the same paper returns they filed last spring.
“Please file today,” the letter begins. “Send your signed return to the address listed above. We will credit the tax you owe and refund any overpayments to you if you owe no other tax or obligation.”
Some readers who contacted me wondered if this could be some kind of scam.
“It wasn’t a text. It wasn’t an email. It was a letter,” said Anne Hovell, 72, who recently received the January 24 letter from the IRS.
According to the letter sent to the couple in Gibraltar, the credit on their account is $1,056. The IRS letter warns that there may be more trouble ahead “if we don’t hear from you.”
“If you don’t file your return or contact us,” the form letter states, “you risk losing this credit. The Internal Revenue Code sets strict time limits for refunds or transfer of credits.”
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Hovell, who tracks transactions in her checking account, knows about the money cleared a year ago and she acknowledged that the amount shown as a credit is what she paid in taxes.
“If a check doesn’t clear, I follow up,” she said. “It was clear.”
Hovell, who retired as a consultant for a technology company, knows that scammers often use email or text. But she wondered if somehow the scammers were getting even more sophisticated and creating actual letters to demand copies of tax returns.
The notion of a scam seemed to make even more sense than thinking that the IRS might send letters to people who have already paid their taxes and filed their returns.
Why would the IRS need another return?
If the feds cashed their checks, she and others wondered, doesn’t that mean the IRS received their return in the mail — since the return and check were mailed together? Why wouldn’t the IRS already have their tax returns?
That’s a good question — and frankly one that might leave you in shock when you think about all the work that goes into filing your tax return in the first place. It’s very disturbing to receive a notice from the IRS when you think you’ve done everything right. Complete the declaration on time. Sent the money that was owed.
The least scary part here, of course, is that the IRS wasn’t trying to collect money from the couple.
The letters I have received from readers are marked “Avis CP80”. And the letters that I saw were sent from Kansas City, Missouri.
The letter goes on to say, “If you have already filed this return: please send a newly signed copy to the address listed above. Be sure to attach copies of all schedules and other documents you have included with the original statement.”
Accumulated Unprocessed Returns
The pandemic has changed many things in life.
The tax system has suffered significant challenges since the start of the two-year pandemic in early 2020.
As of December 4, 2021, the IRS said it had a backlog of 6.7 million unprocessed individual returns and 2.6 million unprocessed amended individual returns.
Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting, said the IRS is still processing millions of 2020 returns and these notices are automatically sent when the IRS deems it has not received a return.
While it may seem at first glance that the delays have gone on so long that the IRS is unable to find many paper returns, many experts say that’s probably not the case at all. An overabundance of automated reviews could have been sent to many people who probably shouldn’t have received them.
Edward Karl, vice president of tax policy and advocacy for the American Institute of CPAs, said the CP80 notice looms large in the process. The notice would normally be sent when a tax return for a given year has not been received, although the filer may have already put a lot of money into the system, for example through estimated taxes .
Someone may have forgotten to file a return when they have a credit in their account, money that may be owed to them as part of a refund, when there has been a troubling event, such as trauma, divorce, death or natural disaster.
The CP80 notice lets the taxpayer know that when a return has not been filed, they can file one in time to claim any refund due.
In most cases, an original return requesting a refund must be filed within three years of its due date for the IRS to issue a refund.
“The only problem is that we are not in normal times,” Karl said.
The IRS, like the rest of the country, has faced more than its fair share of challenges since the COVID-19 pandemic hit. To stem virus outbreaks, the IRS had to close its centers earlier in the pandemic and IRS employees needed to be protected, but heaps of unprocessed returns piled up.
“They have such a backlog,” Karl said. “The pandemic has put them in a deep hole.”
The IRS is backing down but not soon enough for some
Notices sent in January, however, seem to add to the red tape.
On Thursday, the IRS announced it would “suspend notices in situations where we have credited taxpayers for payments but have no record of the tax return filed.”
The idea behind stopping reviews is to avoid even more confusion.
The IRS noted in its statement: “In many situations, the tax return may be part of our current paper tax inventory and has simply not been processed. Stopping these letters that could otherwise have been sent to thousands taxpayers – will help avoid confusion.
Unfortunately, many taxpayers already opened their mail and read the notices before the IRS announced it was stopping some of these mailings.
Diana Vollmayer, of Rochester Hills, said she and her husband had already sent in the copy of their 2020 “certified/receipted” statement.
“We keep records of all transactions,” she said, noting that she, too, was notified via her review of a credit to the couple’s account. They made estimated tax payments but had filed their 2020 return on paper last spring and paid the rest of the money they owed when they filed the return.
She said her friend also received one of those letters, but hired a CPA to review her 2020 taxes and handle the situation for her.
The IRS did not give clear details of the notices it is suspending in its statement, as it does not even mention CP80 in its statement.
In an email response to the Free Press, the IRS said it had suspended issuing notices CP80 and CP080 (Unclassified Tax Return – Account Credit).
The IRS said the CP80 is a notification letter that notifies a taxpayer that the agency has credited payments and/or other credits to their tax account for a certain tax period, but the agency does not has not received his tax return.
The IRS did not reveal how many notices were issued this month. But confirmed that the letters are not a scam.
“If a taxpayer received a notice for a 2020 return, they should not file again,” according to Detroit IRS spokesperson Luis Garcia.
“For taxpayers who filed their 2019 tax return on time, including extensions, and received notice, they should refile their return,” Garcia said.
Taxpayers can also set up and log in to their tax account online at IRS.gov to view their tax status and any correspondence sent by the IRS.
Karl argues that taxpayers who received notice now about a 2020 return would not have to send a copy of the return if they have already filed a 2020 return and know their payment has been made.
If you haven’t filed, of course, you may have money that may be owed to you based on the notice and would like to file to claim a refund.
If you received a notice for a 2019 statement, Karl said, you’ll need to send another signed copy.
The AICPA is part of a stakeholder group called Tax Professionals United for Taxpayer Relief Coalition, which is seeking more relief for taxpayers in light of pandemic-related challenges.
The coalition’s recommendations submitted to the IRS include “a halt to automated compliance actions until the IRS is ready to dedicate the necessary resources to prompt resolution – similar recommendation also included in the National’s 2021 report Taxpayer Advocate”.
The automated system makes more sense in more normal times when the backlog isn’t that big. But massive batches of notices now pose a great risk of alerting many taxpayers to issues that aren’t real on their end, professionals say.
“They’re going to get it wrong in a lot of cases because of the backlog,” Karl said. He said Thursday’s news was welcome but more needed to be done.
The group also wants to see, among other changes, the IRS offer taxpayers targeted underpayment and late-payment penalty relief for the 2020 and 2021 tax years.
The IRS maintains that “Making significant operational changes to our systems, including stopping the printing and sending of certain notices, may require programming and other operational changes. With a outdated tech ecosystem, these are changes that can’t be made as efficiently as they should be — and that’s partly why investing in IT modernization is so important of the IRS.”
Getting one of these letters, of course, raises other questions, such as why would the IRS cash the check if the return that was filed was not processed?
Karl noted that cashing the check when it is received is part of the normal process. This is no cause for alarm.
“It’s safe,” Karl said. The US Treasury uses this money to cover a wide range of government expenses.
You make your check payable to the United States Treasury and include a payment voucher called Form 1099-V that accompanies the paper check. The IRS notes, “When we use your check information to perform an electronic funds transfer, funds may be withdrawn from your account the same day we receive your payment.”
Returns are separated from the check, then returns are processed further after the check has cleared.
Normally we don’t think about the ins and outs of how the IRS handles all this paperwork. But again, not much has been normal over the past two years.
Contact Susan Tompor: [email protected] Follow her on Twitter @tompor.