It’s the kind of job computer systems (even actually previous computer systems working arcane software program) must be good at—

“IF” a ZIP code = [some number] “THEN” [do something]. Or don’t do one thing. On this case, IF a ZIP code is one that’s on the record as being in a California county that was affected by the current flooding, THEN don’t ship taxpayers in these ZIP codes a stability due discover after they file their taxes as a result of they had been allowed an extension of time to file and time to pay till October 16, 2023.

What IRS Deputy Commissioner for Assortment and Operations Assist, Darren Guillot, lately known as “peak discover season” started in earnest in late Might and continues by way of this week. Taxpayers in catastrophe affected counties in California are receiving CP14 stability due notices demanding cost inside 21 days or threat being topic to penalties and curiosity.

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Based on many California tax professionals, the issue appears to be taking place not with returns filed on or earlier than this yr’s April 18 submitting deadline, however with returns which can be being filed throughout the extension interval. Throughout the common submitting season, tax professionals usually file purchasers’ returns as they’re completed and arrange direct debit or different funds to happen on or shortly earlier than the cost deadline. In different phrases, a tax skilled would possibly file their consumer’s return on March 10 however, for money stream or different causes, have the consumer’s cost debited on April 10.

Many California tax professionals (and tax professionals with California purchasers) are doing the identical factor for his or her purchasers who had been granted the disaster-related submitting and cost extension. They’re processing and submitting the returns as shortly as potential (e.g., in Might), whereas organising funds for nearer to the cost due date (e.g., in early October). IRS computer systems are dealing with the scenario with their standard lack of grace.

Underneath regular circumstances extensions give taxpayers additional time to file their tax returns however to not pay their taxes. It could seem that IRS computer systems are processing the California returns, regardless of tax professionals following IRS steering as to how you can mark the returns for processing and particular dealing with, as in the event that they had been regular returns on extension being obtained from taxpayers who had not been granted catastrophe reduction. In different phrases, as quickly as a stability due return has been processed the tax is taken into account assessed and the IRS has 60 days to problem a requirement for cost.

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The requirement to problem a requirement for cost inside 60 days of the tax being assessed is statutory (i.e., it’s required by regulation). However, tax is often thought of assessed on the submitting deadline—once more April 18, 2023 for tax yr 2022 returns. But when the evaluation date has been moved out as a result of catastrophe reduction, doesn’t that transfer the 60-day deadline for issuing CP14 notices as properly? Not in line with the IRS.

Consequently, the IRS erred on the facet of warning and continues to problem the CP14s because the returns are processed. They’re, nevertheless, together with an insert that’s referenced within the physique of every CP14 discover. The insert notes that for taxpayers in areas that had been granted catastrophe reduction, the reduction dates, not the dates within the notices, nonetheless apply.

Whereas the thought of together with an insert with the notices could have gave the impression to be an inexpensive strategy to the IRS, they maybe failed to think about simply what number of different items of correspondence include advertising and marketing inserts that taxpayers merely disregard (throw away) earlier than studying the precise correspondence. They might have failed to think about simply what number of taxpayers don’t fastidiously learn their IRS correspondence or don’t learn it in any respect (even when the IRS tries to jot down the correspondence in plain language). Many taxpayers merely see the return tackle and panic.

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Panicked taxpayers are calling their tax professionals. Dan Herron, a CPA at Higher Enterprise Monetary Providers on California’s central coast, has been advising his purchasers “to name the quantity on the discover and inform the IRS that they’re in a ZIP code that was impacted by the floods and that they’ve till 10/16 to pay the stability due.” Herron expressed frustration that whereas practitioners have adopted IRS directions, the purchasers are nonetheless receiving notices. When purchasers get notices they usually assume that the tax skilled made an error. Consequently, many Calfornia tax professionals, together with Herron, are dealing with not solely additional work (which many purchasers count on to be freed from cost) however offended and annoyed purchasers.

Katy Ayer, a CPA in Arroyo Grande, California, says “I’m not going to trouble calling. However for my purchasers who need me to do one thing, I will have a boiler plate letter that claims ‘Taxpayer is in a catastrophe space, this discover is wrong, no stability is due till October 16 2023.’” Ayer can also be annoyed with the additional work.

Different tax professionals have talked about in social media boards that when their purchasers have known as the IRS, maintain occasions have generally been as much as two hours, generally the IRS representatives appear unaware that the notices are incorrect, and that the IRS responses have been inconsistent. Some taxpayers have been informed to disregard the letters. Others have been informed to arrange an installment settlement.

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Organising an installment settlement is the incorrect reply as a result of the tax isn’t due till October 16. Usually, installment agreements can’t be arrange till after the tax is assessed (which additionally begs the query of when the 60-day statutory clock for mailing the notices begins ticking). Moreover, this “answer” ignores the truth that there is a chance value (time spent) and an precise value related to organising an installment settlement. Why spend the sources on one thing that isn’t essential within the first place?

And ignoring the discover? Oh my. Each the IRS and tax professionals have spent untold quantities of money and time convincing taxpayers not to disregard IRS notices. Now the IRS is saying it’s OK to disregard this one. It’s not an excellent look.

Your complete scenario appears so preventable. Totally different programming. Extra consideration as to how the viewers would possibly deal with the correspondence. A extra proactive strategy generally. As a substitute, yesterday (June 7, 2023), the IRS issued the next assertion:

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“The IRS reassures California taxpayers that they proceed to have an automated extension till later this yr to file and pay their taxes for these coated by catastrophe declarations within the state. The present mailings being obtained by some taxpayers, the IRS Discover CP-14, are for taxpayers who’ve a stability due, and they’re despatched out as a authorized requirement. Whereas the discover obtained by taxpayers says they should pay in 21 days, most California taxpayers have till later this yr to pay below the catastrophe declaration. These letters embody a particular insert that notes the cost date listed within the letter doesn’t apply to these coated by a catastrophe declaration, and the catastrophe dates stay in impact.

The IRS apologizes to taxpayers and tax professionals for any confusion as we proceed to overview the scenario. Taxpayers receiving these letters don’t must name the IRS or their tax skilled.”

The clarification is appreciated however it might take some time to percolate out to taxpayers and plenty of tax professionals and meaning another flood—this one in all pointless telephone calls and correspondence heading in the direction of the IRS.

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