Gary McIntyre, a resident of Rocklin, files his taxes at the beginning of the filing season not because he enjoys it but because he is aware that the sooner he files, the quicker he receives his refund from IRS. Upon being prepared to electronically file his federal return, 70-year-old McIntyre received a 1099-MISC form in the mail with no instructions on how to utilize it. The form was automatically sent to him and other California taxpayers who received a California inflation relief payment of $600 or more, leading to widespread confusion.
McIntyre’s initial reaction was to exclaim “Oh crap.” He and his associates searched the internet and read through IRS publications in an attempt to find answers without resorting to hiring a costly lawyer. The California Franchise Tax Board initially clarified that the California inflation relief, also referred to as the Middle Class Refund, is not considered taxable income and thus does not need to be reported on 2022 tax returns. The IRS later issued guidance on this matter, weeks after the filing season commenced, and several individuals, including McIntyre, sought answers from The Bee.
IRS Neglects Duties as California Taxpayers
According to the National Taxpayer, the failure to identify and address this matter prior to the start of the filing season implies that someone, or perhaps everyone involved, was negligent in their responsibilities. There remains a lack of clarity on the course of action for individuals who have already filed a return and paid taxes on the refund. The IRS has announced that it will provide guidance on this matter in due course. This chaos is only the latest among a series of challenges the tax agency has encountered in recent years.
In 2021, a mere 11% of the IRS consumer calls were able to connect with a representative. Mail inquiries were responded to, on average, 251 days after they were sent. The IRS may now face a fresh wave of consumer inquiries, which could have been avoided.
Individuals are not receiving the required level of service
During his confirmation hearing for the position of IRS commissioner in the Senate Finance Committee last week, Daniel Werfel acknowledged the dire need for improvements in consumer service. He pledged to enhance agency operations, emphasizing that taxpayers who are honest and hardworking and require aid in fulfilling their tax responsibilities are not receiving the necessary level of service.
The Inflation Reduction Act of last year allocated an extra $79.6 million to aid the agency in modernizing and enhancing its services. Advocacy groups, as well as Collins, have been cautioning about the inadequacy of operations in several ways. The IRS failed to provide timely information and guidance in the California and Virginia situations, which had a significant impact. Collins stated that the effects of the delay are difficult to exaggerate.
Virginia officials held a similar perspective. According to its Department of Taxation, individuals who itemized their deductions might need to declare the rebate amount they received as income on their federal return. Software developers had to allocate their time and resources to determining the appropriate course of action and were confronted with an IRS decision that differed from their assumptions.
The absence of timely advice may result in additional postponements in resolving taxpayer accounts. Collins remarked, “This was a well-known problem that had consequences for tens of millions of taxpayers, tax return preparers (who still file most federal income tax returns), and tax software developers.”