The IRS has made significant progress in the historic backlog it’s still facing, but it still has a long way to go.
Chief IRS Commissioner Charles Rettig anticipates clearing the backlog by the end of this year. A big contributor to the now under-control situation was the hiring of several thousand new tax professionals.
Regarding the 2022 tax season, Rettig said, “Through April 1, we have processed more than 89 million returns and issued more than 63 million refunds totaling more than $204 billion.”
While the progress on the processing of taxpayer documentation is good news, the agency cites that the correspondence backlog is but one of the many problems it’s currently dealing with. In addition, it is facing significant barriers in answering telephone calls. With the IRS shifting resources to resolve the backlog, the call-answer rate has fallen to roughly 20% and the agency typically holds steady at around 85% or answering 8.5 of every 10 calls.
It’s understandable that the agency’s response rate took a dip because at the height of the pandemic it was experiencing roughly 1,500 calls a second, according to Rettig’s written testimony.
To assist in addressing taxpayers’ needs, both in terms of the backlog and ongoing telephone communications, the agency has requested additional funding, which President Biden has granted. Late last month Biden “signed off on $12.6 billion for the agency’s 2022 budget, 6% higher than 2021, as part of the $1.5 trillion omnibus spending package,” according to CNBC.
We can anticipate that with increased funding, the IRS will be able to enhance its current IT systems and in turn better identity tax non-compliance, including with the ACA’s Employer Mandate.
Under the ACA’s Employer Mandate, employers with 50 or more full-time employees and full-time equivalent employees or ALEs must:
- Offer Minimum Essential Coverage (MEC) to at least 95% of their full-time employees (and their dependents) whereby such coverage meets Minimum Value (MV); and
- Ensure that the coverage for the full-time employee is affordable based on one of the IRS-approved methods for calculating affordability.
Failing to comply with these requirements can result in IRS penalty notice Letter 226J, which the agency is issuing for the 2019 tax year, in addition to previous reporting years.
With IRS enforcement of ACA Employer’s Mandate non-compliance ramping up, both in terms of coverage offered and with failure to file/furnish, and additional funding on the horizon now is the time for employers to take action.
Protect your organization
To prepare for increased IRS enforcement, employers are encouraged to review their current ACA compliance processes. A great way to do this is through our free interactive tool, ACA Vitals. With Vitals, you can identify potential organizational processes that pose varying levels of IRS penalty risk.
If you receive any penalty correspondence from the IRS, be sure to review it carefully. With the IRS still clearing its backlog, it’s very possible that you may have received the notice in error.
The agency was recently criticized for wrongfully mailing out automated notices communicating outstanding filings, penalties, and other tax information to organizations. The notices were issued in error and the agency was unaware of it because the information it was seeking was in the massive backlog of unprocessed information.
If the notice you receive is accurate, best practices suggest replying via electronic submission. This benefits you for two reasons:
- Electronic submission avoids the paper mail backlog.
- The electronic transmission provides you with an opportunity to more easily save a record of your response. In the event the IRS contacts you again, you will have the necessary documentation to prove you took timely action.
If your organization wants to ensure you’re never hit with an ACA penalty, contact Trusaic to learn about your possible ACA solutions. To date, we’ve helped our clients prevent over $1 billion in IRS penalty assessments.
For information on ACA penalty amounts, affordability percentages, important filing deadlines, steps for responding to penalty notices, and best practices for minimizing IRS penalty risk, download the ACA 101 Toolkit.