PICPA’s Pivotal Role in Addressing Federal Tax Issues

Because the PICPA is a state-based organization, the government relations team keeps Pennsylvania and local tax policy issues at the core of our efforts. However, when the COVID-19 pandemic ravaged the world economy, attention to federal issues took on a new urgency. 

The IRS has been understaffed and underbudgeted for years. The PICPA, in partnership with the AICPA, has been urging modernization and asking for increased IRS funding long before the pandemic hit. And when it did hit, it hit the agency hard. The past few years have significantly added to a hefty pile of issues endured by the struggling IRS. Its inability to perform necessary functions has left many wondering how tax preparers would continue to operate when the highest level of regulatory oversight had been completely derailed.

According to the Coalition for Taxpayer Relief on IRS Service Issues – a coalition of 11 diverse stakeholder groups representing millions from the tax practitioner community – the IRS has an unprecedented number of unprocessed returns compared to prepandemic years. At the start of 2022, the coalition reported that the IRS had a 6-million-return backlog and upward of 5 million pieces of unopened mail. Add in the IRS receiving the highest call volume in history (1,500 calls per second), and all these issues are preventing taxpayers from resolving nagging, but straightforward, points in need of clarification.

To help address these pressing issues, the PICPA joined with our federal counterparts at the AICPA. In January 2022, for example, the PICPA sent a request to members of Pennsylvania’s congressional delegation to sign on to a letter urging Secretary of Treasury Janet Yellen and IRS Commissioner Charles P. Rettig to address the unprecedented challenges facing the agency. The letter requested that the IRS consider several measures that would help bring immediate relief to taxpayers and reduce the backlog during this year’s tax filing season.

More than 200 lawmakers signed the letter proposing that the IRS give taxpayers a break on penalties that were accumulating because of backlogs at the agency. U.S. Senate and House members from both parties asked the agency to excuse some penalties, delay collections, and put fewer limits on taxpayers’ ability to claim reasonable cause for relief. Pennsylvania’s U.S. Reps. Brendan Boyle (D-2nd), Madeleine Dean (D-4th), Mike Doyle (D-18th), Dwight Evans (D-3rd), Brian Fitzpatrick (R-1st), Chrissy Houlahan (D-6th), Fred Keller (R-12th), Dan Meuser (R-9th), Glen Thompson (R-15th), and Susan Wild (D-7th) were cosigners on this important effort.

In response to mounting pressure, the IRS announced on Feb. 5, 2022, the suspension of more than a dozen follow-up letters, including automated collection notices issued when a taxpayer owes additional tax and the IRS has no record of a taxpayer filing a tax return. Other suspended mailings include balance-due notices and unfiled tax return notices. Automatic notices were also temporarily stopped until the backlog is worked through. 

The relief granted by the IRS was a step in the right direction, but it was not enough. To help alleviate additional concerns at the IRS, the PICPA issued another plea in March to the members of the Pennsylvania congressional delegation. Within Congress, the effort was led by U.S. Sens. Robert Menendez (D-N.J.) and William Cassidy (R-La.) and Reps. Abigail Spanberger (D-Va.), Mike Kelly (R-Pa.), Jimmy Panetta (D-Calif.), and Gus Bilirakis (R-Fla.). The bipartisan letters to Rettig asked for clarification on which additional notices can be paused by the IRS and which ones may need congressional intervention to temporarily suspend notices. The letter noted, “We remain concerned that the IRS does not have a comprehensive plan to remedy the numerous problems affecting taxpayers, despite the fact that this filing season is already well underway. For example, there is continued confusion about which notices may be unilaterally suspended by the IRS, beyond the notices the IRS has already suspended, among other issues.”

Forty-two Senators and 65 Representatives signed the letter to Rettig asking why the IRS has not taken certain actions, particularly the suspension of additional notices, IRS statutory authority on suspending additional notices, a delay on the implementation of K-2/K-3 requirements, and targeted penalty relief. 

Pennsylvania Sen. Pat Toomey (R) and Reps. Kelly, Dean, Fitzpatrick, and Houlahan signed the letter urging the IRS and the Treasury Department to implement the recommendations proposed by the AICPA and state societies, including the PICPA, that would ease taxpayer burdens.

Following receipt of the letter, the IRS announced on March 25 that it was suspending the issuance of several more notices, including those mailed to tax-exempt or governmental entities in case of a delinquent return. The suspension of the notices is intended to avoid confusion when a filing is still in process. 

Rettig testified on April 11 at a Senate Finance Committee hearing about the IRS’s plans to get caught up by the end of the year. “With respect to our current 2022 filing season, we are off to a healthy start in terms of tax processing and the operation of our IT systems,” he said. “Through April 1, we have processed more than 89 million returns and issued more than 63 million refunds totaling more than $204 billion.” Rettig indicated that he expects the backlog of millions of tax returns to clear by the end of 2022, which provides a much-needed beacon of hope for the practitioner community. 

Continuing its efforts on behalf of members with compliance difficulties, the PICPA joined the AICPA and other state CPA societies in sending a letter in February to Assistant Treasury Secretary Lily Batchelder and Rettig regarding widespread concerns over Schedules K-2 and K-3. Relief was granted when the IRS issued IR-2022-38, which provides much-needed transition relief related to K-2 and K-3 filers for the 2021 tax year. To help navigate these important changes, the PICPA hosted a town hall covering K-2 and K-3 filings, as well as a meeting between PICPA’s Federal Tax Thought Leadership Committee and Richard Furlong, senior IRS stakeholder liaison.

The PICPA is proud to have been able to help move the needle on federal tax recommendations made on behalf of the AICPA, coalition leaders, and millions of taxpayers. The IRS has acknowledged the challenges and frustrations of this tax season and, thanks to the work of PICPA members and others, steps have been taken to ease some of the burden.
While a bit of relief has been granted, the PICPA continues to work with the AICPA and members of Congress to advance meaningful relief for taxpayers and practitioners that will extend well into the future.

Alexandra C. Fabian is manager of PICPA government relations. She can be reached at afabian@picpa.org.