COVID-19 Impacts IRS Operations

The pandemic impacted all business operations in 2020 in a variety of ways both positive and negative.

Internal Revenue Service (IRS) operations were no exception to the ripple effects of the pandemic.

Here is a quick snapshot of some of the key impacts to the IRS during 2020 beginning with pre-Covid-19 stats:

FY 2010 to FY 2020:

  • The number of all income tax returns increased by 13%, from 151.5 million to 171.8 million (IRS projection) while the IRS budget, in inflation-adjusted dollars, declined by about 20%.
  • The IRS Full-Time Equivalents declined by 22.4% from 94,711 in FY 2010 to 73,539 in FY 2020.

What does this mean?  The IRS is doing more with fewer resources.

And then the pandemic hit, resulting in the following:

Mail Operations

On March 20th, the IRS stopped processing mail which resulted in erroneous Failure to File and Failure to Pay penalties, abatement of dishonored check penalties, interest on refunds, etc.  IRS began to address mail backlog on June 1st.

Collections and Examinations

On March 25th, the IRS suspended liens/levies, halted passport certifications of seriously delinquent taxpayers, ceased referrals to private debt collectors and delayed new examinations until 7/15/20.

Phone Assistance

On March 31st, Accounts Management (AM) phone lines closed for taxpayers and practitioners.  All major phone lines reopened on June 26th (gradual resumption began on April 27th).  As of September 19th, there were over 1.7 million calls to AM (FY 19’ there were 942,564) only 22% answered by live assistors.

In-Person Assistance

As of May 20th, all Taxpayer Assistance Centers (TACs) were shut down with approximately 79,000 appointments canceled.  On June 29th, TACs began to reopen.  During the week ending October 23rd, 60% of TACs were open with limited services.

Notice Production

During the period for April 8 – May 31st, the Notice Production Centers were shut down but not the systemic generation of notices.  Thus, 20 million notices generated and were not mailed.  Notice Production Centers re-opened early June.  Of the 20 million systemically generated notices, 10 million backdated notices were issued.

CARES Act Economic Impact Payments (EIPs)

Section 2201 of CARES Act amended IRC 6428 to provide for a refundable credit against 2020 income tax (“2020 recovery rebates”) based on the 2019 or 2018 return, up to $1200 for single/head of household taxpayers, $2400 for married‐filing‐joint returns, and $500 for each qualifying child, subject to income phase‐outs and caps.

Payments began April 10th and two new online tools were created for EIP issuance; ‘Get My Payment’ and ‘Non-filers Enter Payment Information Here’ for updated bank information and taxpayers with income below the filing requirement threshold.

While communities and businesses shut down to reduce the spread of the coronavirus, the IRS was no exception to having a limited capacity in 2020.

Source:  Hearing before Subcommittee on Government Operations, House Committee on Oversight and Reform ‘IRS in the Pandemic’ 10/07/2020

At Windham Brannon, we are dedicated to keeping you up to date with the latest Covid-19 activity in our Covid-19 Resource Center. Our team is working around the clock to ensure we stay up to date on the latest guidance and information to assist you and your business during this unique time. For further assistance, please do not hesitate to reach out to your Windham Brannon advisor or email us at covid19advisory@windhambrannon.com.

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