The IRS is broken
I don't know if people know this who aren't in my industry, but the IRS is broken. They've just sort of given up as far as I can tell. Here's what's going on:
1.) Identity theft has been a HUGE thing for a long time. They handled it by doing "desk audits" of returns that seemed hinky: changes of address or very different returns or whatever. They were flagged for review by a human by a computer. The returns piled on human's desks. Then humans stopped going to their desks a year ago and... they're still sitting there.
2.) Their computer system is coded in Cobol or something like that: it's ancient and unmaintainable and when Congress says something like "we'll delay the tax filing deadline to July 15" the IRS cannot explain to the software that tax payments made on July 15th aren't late. They're sending out millions of notices to people - my clients - saying their tax payments weren't applied correctly. They'll figure it out eventually, but that leads to the next piece:
3.) They are so backlogged with processing 2019 returns that they're disallowing payments applied from 2019 to 2020. Basically, the IRS has no idea if you owe them money or not.
On top of this, they've now had to send out 3 rounds of "stimulus" payments to people. Oh, and did I mention the pandemic that is keeping people from coming into the office? It's just nuts. I feel bad for them.
But I also feel bad for me, because my clients are getting notices about money they owe (or overpaid, or whatever) and they reasonably conclude that I screwed something up. It sounds hollow to me to explain to them that, no, I'm right and this monolithic institution is just broken. I'm not really that egotistical. It's just, well, that's what's actually going on. I don't think most people are really aware of how bad it really is.
1.) Identity theft has been a HUGE thing for a long time. They handled it by doing "desk audits" of returns that seemed hinky: changes of address or very different returns or whatever. They were flagged for review by a human by a computer. The returns piled on human's desks. Then humans stopped going to their desks a year ago and... they're still sitting there.
2.) Their computer system is coded in Cobol or something like that: it's ancient and unmaintainable and when Congress says something like "we'll delay the tax filing deadline to July 15" the IRS cannot explain to the software that tax payments made on July 15th aren't late. They're sending out millions of notices to people - my clients - saying their tax payments weren't applied correctly. They'll figure it out eventually, but that leads to the next piece:
3.) They are so backlogged with processing 2019 returns that they're disallowing payments applied from 2019 to 2020. Basically, the IRS has no idea if you owe them money or not.
On top of this, they've now had to send out 3 rounds of "stimulus" payments to people. Oh, and did I mention the pandemic that is keeping people from coming into the office? It's just nuts. I feel bad for them.
But I also feel bad for me, because my clients are getting notices about money they owe (or overpaid, or whatever) and they reasonably conclude that I screwed something up. It sounds hollow to me to explain to them that, no, I'm right and this monolithic institution is just broken. I'm not really that egotistical. It's just, well, that's what's actually going on. I don't think most people are really aware of how bad it really is.