In the midst of the government shutdown, the American Institute of CPAs wrote to the U.S. Department of the Treasury and the Internal Revenue Service (IRS) raising concerns about the effect that the government shutdown was having on taxpayers and tax practitioners. The AICPA followed up with another letter calling for additional penalty relief for taxpayers for underpayments and late payments.
Annette Nellen, CPA, CGMA, Esq., chair of the AICPA Tax Executive Committee, wrote In a January 24 letter, “The need for unhindered availability of a fair and administrable tax system is rising as we approach the opening of tax filing season.” She emphasized feedback the AICPA had received from its members. “According to our members, the many IRS services and processes that are not functioning, or are not functioning at their normal levels, are creating more problematic issues.”
In the letter, the AICPA identified six effects the shutdown was having on this year’s tax filing season and provided recommendations. The recommendations included:
- Provide automatic extension of notices and collections until 90 days from the shutdown ending date, stop assessing penalties and interest and cease sending automated notices;
- Maintain all online systems and accounts operating effectively;
- Provide full assistance to taxpayers and tax practitioners; and
- Retain more IRS Chief Counsel attorneys for TCJA guidance.
In a separate January 28 letter, Nellen urged Treasury and the IRS to provide additional and more extensive relief than was provided in IRS Notice 2019-11 to taxpayers who were unable to adjust their withholding and estimated tax payments for the 2018 tax year due to the changes resulting from the Tax Cuts and Jobs Act (TCJA).
“As part of the implementation of TCJA, the IRS adjusted the withholding tables resulting in lower withholding,” she wrote. “However, the adjusted withholding tables did not account for factors such as the elimination of the personal and dependency exemptions or reduced itemized deductions. As a result, taxpayers may have inadvertently under-withheld their taxes and potentially face penalties.”
The AICPA recommended that:
- Taxpayers receive relief from underpayment penalties if they paid at least 80 percent of the tax due for the current year or they paid 80 percent (100 percent if their adjusted gross income (AGI) exceeds $150,000) of amount of tax shown on their U.S. income tax return for the prior year.
- Taxpayers receive relief from late payment penalties if they make a timely request for an extension of time to file their income tax return and pay at least 80 percent of the taxes owed with the request.
- IRS establish an expedited process to grant individuals’ payment penalty relief for reasonable cause due to the considerable uncertainty surrounding the TCJA.
- IRS identify specific circumstances for which providing automatic relief of penalties for the 2018 taxable year is appropriate, thus relieving taxpayers of the administrative burden of requesting a waiver of penalties.
- IRS provide businesses and tax-exempt organizations relief from underpayment and late payment penalties.