Automation often makes life easier, until it doesn't.
Some very surprised California taxpayers learned that lesson this week. So did the Internal Revenue Service.
The IRS' automated notice issuance system sent most California taxpayers letters saying that they had missed their filing deadline and owed the U.S. Treasury.
The IRS was wrong.
The agency's mistake understandably freaked out Golden State residents whom the IRS previously granted a new Oct. 16 due date. The extra time was allotted so the taxpayers could deal with problems caused by widespread natural disaster across the state earlier this year.
The IRS issued a mea culpa and assured the Californians that they aren't in any unpaid tax trouble. It also reiterated that they have until mid-October to take care of their tax filings and payments.
Trying to get back on schedule: We can again blame the COVID-19 pandemic for yet another tax problem.
Shutdown protocol during the height of the national coronavirus infection led to a huge filing backlog (that just won't quite let go) within the IRS. That forced the IRS to suspend its normal tax notices.
This year, however, with COVID abating, the IRS is working to get back to business as usual. Part of that process is the resumption of sending suspended tax notices to taxpayers.
In most cases, these required-by-law IRS warning letters go out automatically when the agency's records don't jibe, such as when it has filed forms but no payments, or vice versa.
This time, though, the IRS' automated system got the California taxpayers' deadline wrong. And that mistake has understandably freaked out Golden State residents whom the IRS previously granted the new October due date.
Major storms + widespread damage = more tax time: The Federal Emergency Management Agency (FEMA) in February designated 41 California counties eligible for disaster relief from severe winter storms, flooding, and mudslides that struck most of state from Jan. 8 through Jan. 31.
The IRS then followed up, giving those filers then were given until Oct. 16 to meet a variety of tax tasks, including filing their 2022 tax returns.
However, millions of California taxpayers, and their tax advisers, who have been working toward the extended Oct. 16 due date didn't know what to do when this week they got a surprise balance-due IRS Notice CP14.
"I just want to know if this is a mistake or if this is intentional. Did we misunderstand the rules for disaster relief?" said Jeff Boger of the mailing saying that his tax payment was due June 26.
"It's not clear to me why it came out when it did," Boger added in his interview with the NBC television affiliate KCRA in Sacramento.
IRS acknowledges mailing error: The IRS has an explanation for the timing.
It was their bad. And the tax agency is sorry.
"The IRS reassures California taxpayers that they continue to have an automatic extension until later this year to file and pay their taxes for those covered by disaster declarations in the state," according to a statement posted at IRS.gov.
"While the notice received by taxpayers says they need to pay in 21 days, most California taxpayers have until later this year to pay under the disaster declaration," added the IRS.
The agency also said the notices, which are sent out as a legal requirement, included a special insert noting the letters' payment date does not apply to taxpayers covered by a disaster declaration. The disaster dates remain in effect.
Again, that's Oct. 16 for the disaster affected Californians.
"The IRS apologizes to taxpayers and tax professionals for any confusion as we continue to review the situation," according to the statement. "Taxpayers receiving these letters do not need to call the IRS or their tax professional."
Not the first wrong notices: While any communication from the IRS can be disconcerting, it's particularly upsetting when you get official word that the agency thinks you've don't something wrong.
And these California CP-14s are just the latest IRS notice snafu.
Back in the early days of the COVID-19 pandemic, the IRS issued wrong nonpayment notices. The agency sent out another mistaken mass notice mailing two years later.
Act, but don't panic: It's possible — OK, likely — that other incorrect notices will go out, especially as the IRS works to get back to more normal operations.
If you are in a disaster area and have a later deadline, don't panic. But do let your tax adviser know. Then you and/or the tax pro will touch base with the IRS about the timing discrepancy.
Make the same move whenever you get a tax notice that's confusing. Acknowledge it. Alert your tax pro. Make sure you understand what the IRS is asking you to do. Do it, either by complying with the requested action or providing the IRS information as to why it is wrong.
And definitely do this by the deadline on the notice. Missing it could cause you more problems, even if the IRS is found to be, as in this case, the one who made the mistake.
You also might find these items of interest:
- Considerations in making a major disaster tax claim
- Don't ignore that IRS letter and nine other tax notice tips
- IRS accepting uploaded docs to resolve certain tax notices
- New IRS tax collection notices offer QR code contact option
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