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Texas Society of Certified Public Accountants Guest Blog: "Will the IRS Destroy 30 Million Unprocessed Tax Returns Again This Filing Season?"

March 7, 2022

Leo Unzeitig article on "Will the IRS Destroy 30 Million Unprocessed Tax Returns Again This Filing Season?"

Texas Society of CPAs

In a March 7, 2022 Texas Society of Certified Public Accountants’ blog, Leo Unzeitig, senior associate in our San Antonio tax controversy and tax planning practices, addresses the recent U.S. Treasury Inspector General for Tax Administration (TIGTA) report regarding the pandemic’s impact on the IRS’ ability to process 2020 business tax returns.

The number of unprocessed paper returns went up from just over 200,000 in 2019 to nearly 8 million in 2020. And, According to TIGTA, the IRS destroyed rather than processed an additional 30 million paper returns, which seem to be solely information returns (i.e., Forms W-2, 1099, etc.) that are generally filed for computer matching purposes and have no corresponding tax due.

Unzeitig further discusses potential impacts of mismatched records, such as the IRS computer system proposing failure-to-file information return penalties.

He adds, “We have increasingly seen this type of issue come up and the Combined Annual Wage Reporting (CAWR) unit, often charged with considering responses and requests for penalty abatement in this area, is so understaffed that correspondence is unanswered for months, if not years, and very strong requests for abatement are denied without explanation. More often than not, penalties are assessed and revenue officers proceed with aggressive collection actions before the issue can be resolved and the penalties abated.”

Unzeitig goes on to urge tax professionals to make a record of the issue now, in case they need to raise it in a penalty abatement letter or in response to criminal charges for failing to file returns. He also recommends encouraging clients to file information returns electronically rather than by paper.