Taxpayer Q&A: I received a past due notice from the IRS. What should I do?

Are you waiting on the IRS to cash your tax payment check? Have you received a past due notice for a tax return that was filed timely? If so, you are not alone.

The IRS recently confirmed a backlog of unprocessed mail, due to the unprecedented circumstances surrounding the coronavirus pandemic. As a result, many taxpayers, primarily those filing individual, estate or trust returns, received balance due notices. Then, on August 21, 2020, the IRS announced it was temporarily suspending the mailing of some notices; however, the agency did not specify for how long. Taxpayers may continue to receive notices that were automatically generated by the system and mailed before the suspension announcement.

IRS guidance for checks caught in backlog

So what should taxpayers do if they receive a notice or experience a check-cashing or payment processing delay? The IRS recently clarified, through an update to its COVID-19 operations webpage, that pending checks will be posted as of the date received, not the date the payment is eventually processed. In the meantime, the IRS stressed that taxpayers should not cancel any checks or submit new ones and that funds should be kept available in the appropriate account, as their staff continues to work through the processing backlog. Taxpayers will not be subject to penalties and interest, provided the check remains active and does not bounce.

Here are the common scenarios taxpayers are currently facing and what they can expect:

• If you stopped payment on a check issued at any time between March 1 and July 15, the IRS will not charge a dishonored check penalty.
• If you did not stop your uncashed check and continue to get late notices, the IRS will not charge late payment penalties and interest (if payment is postmarked by July 15).
• If you stop check after July 15, the IRS will not charge a dishonored check penalty, but repayment (either electronic or new check) may be subject to late payment penalties and interest. This may require submitting a written request to the IRS for abatement of the penalties and interest.

As with so many other facets of life and business during the pandemic, the IRS is contending with a new normal that requires a little patience. If you receive an IRS notice, contact your RKL advisor with any questions.