More Erroneous IRS Notices

In yesterday’s mail we received several IRS CP59 Notices for clients. What’s a CP59 Notice? Well, here’s the first two lines:

You didn’t file a Form 1040 tax return.

You haven’t filed your tax return for the tax year ending on December 31, 2019.

Of course, all the clients had filed their 2019 tax returns in October. However, these clients had to paper-file for various reasons and the IRS simply has not yet processed those returns. Based on a phone call with the IRS, it appears that the IRS is still processing paper returns from July! Yikes! Based on that timeline these returns may not be processed until May.

These notices were issued because these clients had income that showed they needed to file a tax return (1099s, etc.) and none had been noted. The notices, dated February 15, 2021, are automatically sent four months after the extension deadline.

The CP59 notice includes a Form 15103 that you’re supposed to complete and return along with a copy of your tax return. The helpful individual I spoke with at the Practitioner Priority Service noted that taxpayers who paper-filed after July and who receive the CP59 notice should simply ignore the notice and should not file Form 15103 and send another copy of their tax return.

The IRS is simply backlogged with paper, and while IRS Commissioner Rettig has stated the IRS is caught up, that’s simply not the case. The handy IRS Operations Status Page says that the IRS is opening mail within normal timeframes. Unfortunately, that same page states:

The IRS has also made significant progress in processing returns. As of January 29, 2021, we had 6.7 million individual tax returns in the processing pipeline

How long you may have to wait:  It depends on where you sent your tax return and where it is in the process. We are processing returns we received over the summer due to the extended July 15 tax filing due date and, in some cases, are processing tax returns dated as early as July 15, 2020. However, we are rerouting tax returns and taxpayer correspondence from locations that are behind to locations where more staff is available, and we are taking other actions to minimize any delays. Tax returns are opened in the order received. As the return is processed, it may be delayed because it has a mistake, is missing information, or there is suspected identity theft or fraud. If we can fix it without contacting you, we will. If we need more information or need you to verify that it was you who sent the tax return, we will write you a letter. The resolution of these issues depends on how quickly and accurately you respond, and the IRS staff trained and working under social distancing requirements to complete the processing of your return.

What you should do: Other than responding to any requests for information promptly, there’s no action you can take. We’re working hard to get through the backlog. Please don’t file a second tax return or contact the IRS about the status of your return. [emphasis added]

There’s no blame to the IRS–this is the reality of dealing with Covid. Unfortunately, with 2020 returns about to start flowing into the IRS I don’t see improvement coming on return processing anytime soon. What can you do? Basically, efile if at all possible. Electronically filed returns, for the most part, are processed smoothly. But if you have to paper-file for any reason, just expect your return to take time to be processed. I’d estimate nine months for a paper-filed return to be processed. (The IRS will be backdating the filing date to the postmark date.)

And if you do have to paper-file a return, make sure you use certified mail. It’s inevitable that some returns are going to get lost. If you have your certified mail receipt, your return should be treated as if it was filed on the date you mailed it to the IRS. This year, it’s absolutely worth the additional $5.

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