Taxable Talk

Last week I continued the saga of my client, call him John Smith, who has been waiting and waiting to receive his 2020 tax refund.  His 2020 federal return was selected for identity verification; he successfully completed that process in March 2023.  His refund, though, is nowhere to be seen.  Mr. Smith is not desperate for the funds (luckily, he’s a successful businessman); however, he’d like this resolved.

This morning, I ran yet another IRS Account Transcript to see if there had been any progress with this.  Unfortunately, his return does not show as having been processed.  Yes, the agent I spoke with in August said to allow nine weeks so this isn’t surprising.  But what of my request for the IRS Taxpayer Advocate?

Crickets.  I haven’t heard a thing (nor has Mr. Smith).

Meanwhile, interest continues to pile up on this which you and I are paying for.  To date, the interest totals over $4,000; if the refund is issued exactly a month from today there will be another $241 of interest.  And I’m not particularly hopeful this will be resolved by the end of October.

I’d love to state that this is a one-off in dealing with the Identity Protection Unit and the Taxpayer Advocate.  It’s not.  I dealt with a similar case last year with the Identity Protection Unit; it took nearly a year to get resolved.  (In that case, my client owed tax–which he had paid when he filed the return–but he needed that return to be in the IRS computer system for another matter.)  I strongly believe that the ancient IRS computer systems (the main IRS computer system dates to 1959 and, yes, you read that correctly) has a lot to do with the issues.

I’m also disappointed with the Taxpayer Advocate Office.  Yes, I know they’re buried, but no acknowledgment, no nothing means I’m stuck.  Now as a tax professional I know how to deal with this situation. (If in a month if nothing has changed I’ll be making more phone calls.)

But consider Joe and Mary Doe who are not familiar with the IRS.  They desperately need their $20,000 tax refund…and they’re stuck in limbo.  If they did exactly what Mr. Smith did, they would have done everything correctly…and be stuck in limbo.  If you wonder why there’s frustration with the IRS, and why members of Congress have IRS liaisons, look no further.

The next update on this saga will be in a month (unless Mr. Smith magically receives his refund or I hear from the Taxpayer Advocate).

One week ago I uploaded Part 2 of my client’s ongoing saga of obtaining his 2020 tax refund.  My client, call him John Smith, was supposed to either receive his refund by mid-August or we were supposed to receive a call.  Mid-August came, and Mr. Smith had not received his refund (and it did not show as having been issued on an Account Transcript) nor had I received a call from the IRS.  On August 16th I again called the Practitioner Priority Service (PPS) to see if there had been any progress.  They couldn’t see any, and again transferred me to the Identity Protection (IP) unit.

Call #1 (August 16):  After being on hold for just under an hour, the IP Unit agent picked up.  I explained the situation, and she investigated through her systems.  After another hold-time period of 15 minutes, she said because my Power of Attorney form covered only 2020 she couldn’t talk to me.  I explained that Mr. Smith had already verified his identity and we are just trying to obtain the refund.  “No. I may need to ask questions about 2019, and without that I must let this call end.”  [1]

Call #2 (August 16): Since I knew the IP agent was wrong, I called back.  This call is actually three attempts, but all three ended up getting: “We’re sorry, but due to extremely high call volume in the topic you’ve chosen we cannot take your call at this time.  Goodbye.”

I did have Mr. Smith sign a new POA covering 2019 (though it wasn’t necessary), and submitted it to the IRS on August 17.

Call #3 (August 17): At 7am PDT I called the IP unit again.  I was directed into the callback service (that told me I’d get a return call in 29 minutes, which I did).  I explained the issue to the agent, and he said, “If your client is not on the phone with you I cannot help you.”  I told him that with a signed IRS Power of Attorney form, I’m allowed to act for my client.  “No, you’re not for this purpose.”  And he hung the phone up on me. [2]

Call #4 (August 17): I made another attempt.  However, “”We’re sorry, but due to extremely high call volume in the topic you’ve chosen we cannot take your call at this time.  Goodbye.”  I did not have enough time to try again.

Call #5 (August 18): I again called at 7am, and again received a callback (this time in 38 minutes).  I again explained the situation to the IP unit agent…and we got disconnected. I’ll be generous and state this was an IRS phone system issue and that I wasn’t hung up on, but I have my doubts.

Call #6 (August 18): The sixth time was the charm (sort-of).  I received the promise callback (in 29 minutes), and this agent agreed that I didn’t need a 2019 POA. Unfortunately, he saw nothing having been done.  He put another referral into the sub-unit to get the return processed…but with a nine-week turnaround time.  He said he did see notes of the previous conversations, but this was all he could do.  I also discovered that on April 14th the IP unit supposedly printed my client’s electronically filed return and forwarded it for processing.  [3]

That afternoon I spoke with my client and explained what had happened.  I told him that besides the IP unit referral, the next step would be to complete IRS Form 911–a request for assistance from the IRS Taxpayer Advocate.  I explained that given IRS promises he was likely eligible for assistance.  I faxed Form 911 that afternoon.

I’ll be back next week with more, but let’s take a look at some IRS systemic issues that my client ran into.

[1] and [2].  I’ve been calling the IP unit for years, and many of the agents do not want to speak with authorized representatives.  When a client grants me an IRS Power of Attorney (POA) form that gives me full rights to negotiate and talk with the IRS on any issues that the POA covers.  That includes identity protection issues.  The behavior I saw with Mr. Smith is typical:

• Agents say years that aren’t required for my POA are.
• Only the taxpayer, not an authorized representative, can speak to the Identity Protection Unit.
• When notices are sent by the Identity Protection Unit, previously authorized representatives are not copied.  For example, let’s say I have a POA on file for Jane Brown for the 2022 tax year.  The Identity Protection Unit sends her a notice requesting she verify her identity for her 2022 tax return; I will not be copied.  This is especially troublesome when we have clients who are traveling or reside outside the United States and don’t have reliable mail.

[3] Yes, you’re reading this correctly.  My client electronically filed his tax return, but the only way it can be processed is paper.  It’s not that 2020 returns can’t be electronically filed today (they can, through sometime in November); rather, it’s how the IRS Identity Protection Unit is setup.  Interestingly, TIGTA (the Treasury Inspector General for Tax Administration) issued a report today titled, “The Internal Revenue Service Has Experienced Challenges in Transitioning to Electronic Records.”  Boy, is that true.

Meanwhile, my client is stuck waiting.  And you and I pay for this: My client will (eventually) be paid interest on the refund.  And with his refund being approximately $30,000, that interest will be substantial.

I’ll be back next week with Part 4 of this saga.

When we last left the Identity Protection (IP) Unit saga of John Smith, he successfully verified his identity and was told he should receive his refund within nine weeks (or by May 25th).  On July 12th Mr. Smith sent us a message saying he hadn’t heard a thing (nor had he received his refund).  I confirmed with him that he had successfully verified his identity.

I ran an Account Transcript to see if the tax return had been processed; it did not show as having been processed.  On July 14th, I called the IRS Practitioner Priority Service (PPS); PPS has some tools that can see returns in other stages of processing than practitioners can.  Unfortunately, the PPS representative didn’t see anything; he transferred me to the IP Unit.  I was told:

Your client successfully verified his identity on March 23.  The 2020 return has not posted to the main IRS system for processing; , the issue is that even though everything has been entered into the system by the IP unit, it’s stuck.  The return is “being worked” to get unstuck. A referral was sent to the subunit working the return (with you as contact).  You will hear back within 30 days with either your return having been processed or they will call me.

Thus, all should be well by August 14th, right?  I think you can guess where this is going (part 3 will be next week)….

I’ve written about James Smith before.  A few years ago, Mr. Smith was the victim of IRS “help” when they changed the Employer Identification Number (EIN) without his knowledge; that saga ended in 2022.  Unfortunately, Mr. Smith is now suffering through an Identity Protection Unit saga with no end in sight.

In 2021 Mr. Smith’s 2020 personal tax returns were timely filed with the IRS and Arkansas.  Mr. Smith’s 2020 federal return showed a refund of approximately $30,000; his Arkansas return showed a refund of about $10,000.  He promptly received his Arkansas refund.  However, about four months after filing Mr. Smith received an IRS 5071C letter requesting he verify his identity.

The process when you receive such a letter is that you must create an account on IRS.gov.  That’s now done through a third-party company, ID.me.  That company requires you to verify your identity–so you end up having to verify your identity twice.  The IRS now includes this important piece of information in their FAQ: