You did everything right. You owed money to the IRS so you sent in a check before the deadline. Weeks have gone by, and they still haven’t cashed your check yet. What gives?
This is the story we are hearing from more than a few clients.
They sent some pretty big checks in to the IRS to pay their taxes, someone at the IRS even signed to acknowledge receipt, but the IRS still hasn’t cashed the checks.
Now, they are not sure what to do. Should they stop payment? Send new checks?
Turns out the clients who called us are not the only taxpayers in this awkward situation. Several recent tax-oriented news columns have addressed this very issue, as uncounted taxpayers – even those who paid timely – are receiving dunning notices from the IRS.
The first thing to know, says Forbes tax contributor Kelly Phillips Erb, is “it’s not you, it’s them.”
The IRS estimates it received over one million pieces of mail each week, including checks and tax returns, during the March 13 to June 30 period when it was closed during the Covid-19 related shut-down. No one was there to open the mail, so it piled up in “rooms of boxes.”
Now that they are back to work, IRS representatives are processing that mountain of mail (an estimated 11 million pieces, by the way!), but computerized mail response systems have already started dunning taxpayers for taxes due, oblivious to the fact that some of those checks are already sitting inside the IRS in millions of unopened envelopes.
If you’re in this situation, what can you do?
Don’t cancel your check. According to the IRS, “any payments will be posted as of the date we received them rather than the date the agency processed them. To avoid penalties and interest, taxpayers should not cancel their checks and should ensure funds continue to be available so the IRS can process them.”
Keep your documentation handy. Until your situation is resolved, keep a file with all your relevant copies and receipts, showing what you sent and when you sent it.
Keep your tax preparer in the loop so they know what is going on. Be sure to share with them copies of any correspondence you’ve received from the IRS. Tax expert Hill says her best advice is to “never ignore IRS notices.” The system is admittedly confused right now, but your tax preparer can make sure you stay on the straight and narrow.
“Don’t Call,” says the IRS, but do maintain a paper trail. In its latest alert, the IRS asks taxpayers to be patient and not call in. Tax expert Erb acknowledges that advice, but says she’s keeping a written correspondence trail to protect her clients.
The IRS has posted the following alert. Stay tuned to their website for future developments:
Pending Check Payments and Payment Notices: If a taxpayer mailed a check (either with or without a tax return), it may still be unopened in the backlog of mail the IRS is processing due to COVID-19. Any payments will be posted as the date we received them rather than the date the agency processed them. To avoid penalties and interest, taxpayers should not cancel their checks and should ensure funds continue to be available so the IRS can process them. To provide fair and equitable treatment, the IRS is providing relief from bad check penalties for dishonored checks the agency received between March 1 and July 15 due to delays in this IRS processing. However, interest and penalties may still apply. Due to high call volumes, the IRS suggests waiting to contact the agency about any unprocessed paper payments still pending. See www.irs.gov/payments for options to make payments other than by mail.