Posted February 22, 2022

Occasionally, the IRS announces it will make things easier for taxpayers or be less aggressive in its collection efforts. Sounds great, right? But remember, the devil is in the details. The Service made another such announcement on February 9, 2022, when it posted, “IRS continues work to help taxpayers; suspends mailing of additional letters.” A week or two before the February 9 announcement, Congress sent a letter to the IRS asking it to suspend automated collections in light of the huge IRS backlog in processing returns. Many of the IRS’s notices and letters are time sensitive. Collection notices were being issued before the IRS could process the return and/or additional information, which adversely affected taxpayer’s assets and/or rights. The IRS’s decision to suspend use of automated letters and notices appears to be in direct response to Congressional pressure.

IRS Collections Doesn’t Affect Businesses

While the announcement appears helpful on its face, there are two important facts to keep in mind. First, the partial suspension of the automated collection notices applies to individuals, not businesses. When the IRS makes announcements about collection efforts, it does so in a general manner. If you’re not familiar with how the IRS works, you might think that the changes apply equally to businesses as well as individuals. Unfortunately, that’s not usually the case, which is frustrating because it’s misleading for businesses and their owners. The proverbial devil is in the details and the vast majority of the time businesses aren’t included in the “helpful” changes to collection. The present case is no different.

The February 9 announcement includes ten suspended notices – see the chart below; eight are for individuals and only two are for businesses. For individuals, the IRS is suspending CP501, CP503, and CP504, which are the first, second, and final notices of a balance due. The final notice of balance due includes a notice of intent to levy. However, the IRS is not suspending those notices for businesses as well. Instead, the two suspended notices for businesses are limited to reminders to file the previous years’ tax return. So, it appears the IRS will not send businesses what in essence is a helpful reminder about a missing return, but will continue with automated collections. While that might not seem to make much sense, it fits with our experience over the past 20 years.

Suspension of Notices Is Temporary

Second, the “helpful” suspension of notices is temporary. Per the announcement, “These automatic notices have been temporarily stopped until the backlog is worked through. The IRS will continue to assess the inventory of prior year returns to determine the appropriate time to resume the notices.” There’s no proposed timeframe or criteria for determining the appropriate time to resume the automated collection for individuals. Unfortunately, the IRS is not likely to make another announcement in the future that it is resuming automated collections, certainly not with as much fanfare as its announcement that it is temporarily suspending them.

In short, if you have a business (or personal) balance due with the IRS, don’t assume the IRS has suspended collections or it will forget about you. Give us a call to discuss some options to resolve the balance due.