E257 How IRS Processing Delays Are Slowing Down Probate

E257 How IRS Processing Delays Are Slowing Down Probate

Probate is already a slow process, and recent IRS processing delays are making probate even slower.

Most probate cases must receive IRS tax clearance in order to close the estate. Otherwise, the executor and heirs are at risk for lingering tax problems and getting hit with unexpected tax bills later. Once the heirs understand this, they are fine with taking the time to close the estate properly!

The Taxpayer Advocate is a government entity whose job is to oversee and review the performance of the IRS. The Taxpayer Advocate’s recent annual report https://www.taxpayeradvocate.irs.gov/reports/2021-annual-report-to-congress/ breaks down the extent of the IRS delays, why we can’t get any answers, and what to expect this year.

We are in the frustrating position where we have to tell clients repeatedly that we are “waiting on the IRS.” Hopefully this blog helps to clarify the situation.

Is the IRS having processing delays?

Is the IRS having processing delays?

“Delays” an understatement. The following are quotes from Taxpayer Advocate’s sub-report: ”PROCESSING AND REFUND DELAYS: Excessive Processing and Refund Delays Harm Taxpayers https://www.taxpayeradvocate.irs.gov/wp-content/uploads/2022/01/ARC21_MSP_01_Processing-Delays.pdf

  1. “At the close of the 2021 filing season, the IRS had 3 million returns awaiting manual processing
  2. “As the IRS is preparing to begin the 2022 filing season, it is poised to carry over millions of unprocessed returns and millions of pieces of taxpayer correspondence, resulting in even longer delays for taxpayers who have been patiently waiting for far too long”
  3. “Taxpayers who have filed their tax returns continue to wait, and wait, and wait for any update from the IRS”

These direct quotes match our experience without a doubt. It can take months to get any response from the IRS. We even include a copy of our letter with a pre-paid envelope and simply ask them to stamp the copy and mail it back to us. In years past, it only took a few weeks to receive our stamped copy. Now, it’s taking them months to just open the letter.

When we do finally get a response, it’s often a punt: just a letter saying they need six more months to a year to respond. Even worse, when we finally get a real response, sometimes it’s incorrect. So, if there’s an issue (even a non-problem, IRS mistake), it resets the clock, and we have to wait another 6 months or more for the IRS to look at it again.

Can I contact the IRS for a status update?

Can I contact the IRS for a status update

Clients naturally ask if we or they can call the IRS for an update or timeline. It is very unlikely.

From Taxpayer Advocate’s sub-report: “TELEPHONE AND IN-PERSON SERVICE: Taxpayers Face Significant Challenges Reaching IRS Representatives Due to Longstanding Deficiencies and Pandemic Complications https://www.taxpayeradvocate.irs.gov/wp-content/uploads/2022/01/ARC21_MSP_03_Telephone.pdf

  1. “In 2021 the IRS received 282M phone calls. Customer service representatives only answered 32M (11%.)
  2. “A taxpayer contacted by the IRS regarding her deceased mother’s return was told to call in but has been trying unsuccessfully for over a year to get through to the IRS”
  3. IRS aims to respond to taxpayer correspondence in 45 days. As of Jan 1 their turnaround time is nearly 1 year”

In our experience, we don’t even have the 11% chance of talking to someone. We deal mostly with estates, which are a higher level of complexity than a standard tax filing. We are not going to get a call back from a customer service agent; we have to wait for our file to get to a higher-level agent or even an IRS attorney. So, yes, over one year for ANY sort of letter or reply sounds accurate!

Will IRS processing and communication improve?

Will IRS processing and communication improve?

This is unlikely; the IRS has a big hole to dig out of. The IRS didn’t complete processing all 2019 returns until June 2021, “Thus, the unprecedented processing and refund delays taxpayers experienced in 2021 could be as bad, and potentially worse, in 2022.”

We can only hope that our client’s files are at the top of the 35.3 million pile. Please know, we are waiting along with you, and we’re frustrated, too. Unfortunately, we’re all in the same boat. In our experience, no one wants to try to close the estate without the tax clearance and bear the risk of the IRS coming after them.

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