As everyone (hopefully) knows, the Government has been shut down for over two weeks now. Much has been written about the IRS having to furlough nearly half of its workforce during the shutdown. However, one major issue emerging as the shutdown continues involves the IRS’s incongruent collections activities. The IRS announced in their “Lapsed Appropriations Contingency Plan” that non-automated collections activities would be suspended during the shutdown. However, automated collections activities continue. This means that taxpayers who owe the IRS will continue receiving automated notices.
Last week, the AICPA sent a letter to Acting Commissioner Bessent, urging him to cease automatic collections activities. While some collections employees will continue working during the shutdown, the AICPA warns that there will be limited IRS employees who can process taxpayer responses or assist taxpayers with resolution of their issues.
During past shutdowns and Covid, the IRS has continued sending automated collections notices. While a short shutdown may not have much of an impact on the Collections function, a long shutdown may cause major issues for taxpayers. For example, if a taxpayer receives an automated collections notice that provides for a Collections Due Process (“CDP”) hearing, he or she would have only 30 days to file a request for a CDP hearing. Generally, if you file a CDP request, collections activities stop. But if a taxpayer files a CDP request during a shutdown, there may not be anyone to actually process the request. The employees who would take the next step of filing a lien or levy may be furloughed, but when the IRS reopens, what happens to the backlog of unprocessed CDP requests? With a log jam of CDP requests, it is certainly possible (if not probable) that CDP requests will not be processed timely. And if a CDP request is not processed timely, the IRS may continue collections activities, e.g. filing a lien or levy, not knowing the taxpayer timely filed a CDP request.
This is just one example of a potential disaster that this shutdown could cause. The solution, as described by the AICPA is logical – cease all collections activities until the IRS is working at full capacity to ensure congruent results. Tax practitioners are well aware that different IRS functions do not always communicate well with each other. Adding the complexity of a government shutdown where part of the IRS is functioning and the other part is not, is a recipe for disaster.
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