The IRS announced the 2025 standard mileage rates today. The new rates are:
The IRS announcement is here.
Yesterday, President-Elect Trump announced that he would nominate former Missouri Congressman Billy Long as IRS Commissioner. This is a nomination that should not happen, and if does occur I hope that the Senate does not “Advise and Consent” to Mr. Long as IRS Commissioner.
Before I get into my reasons, there has been commentary from the left that President-Elect Trump cannot fire FBI Director Wray or the current IRS Commissioner (Danny Werfel) because their terms have not expired. Legally, this is incorrect. Both Wray and Werfel are political appointees in the Executive Branch; the Executive (soon to be Trump) has the absolute constitutional right to fire any and all political appointees within the Executive Branch (the FBI is within the Department of Justice, the IRS is within the Department of the Treasury). Yes, Director Wray has three more years of a ten-year term; however, that doesn’t prevent President Trump on January 20th firing him. It’s even clearer for IRS Commissioner Werfel: Internal Revenue Code section 7803(d) specifically notes that IRS commissioners can be “removed at the will of the President.”
President Trump’s announcement noted, “Since leaving Congress, Billy has worked as a Business and Tax advisor, helping Small Businesses navigate the complexities of complying with the IRS Rules and Regulations. Taxpayers and the wonderful employees of the IRS will love having Billy at the helm.”
According to an article in Tax Notes, Senator Todd Young (R-IN) liked the nomination. Predictably, Senator Elizabeth Warren (D-MA) didn’t like it (but I doubt she would like anyone nominated by President Trump). Joe Kristan (who is the principal writer of Eide Bailly’s tax blog) told Tax Notes, “[W]hile it’s not surprising that Trump would want his own commissioner, it is a little surprising that he didn’t find somebody from the business world who would know something about managing a large enterprise, if only to control it better.”
My reason is different. Mr. Long’s tax background is a bit checkered: He worked for what we in the tax professional community call an “ERC Mill.” These were the companies who had continual radio and television advertising saying everyone qualified for the Employee Retention Credit (ERC), and you can get thousands and thousands of dollars from it. An aside: Our firm had five clients approach us about the ERC. Only two qualified: one qualified for one quarter; the other, who was told by an ERC mill that he qualified for $125,000 in credits, qualified for about 15% of that. The ERC mills left a very bad taste with tax professionals. But I digress….
I did a search of the literature and cannot find anything where Mr. Long came out against these mills, or noted the issues with them. It’s possible, of course, that he has; if I see anything that comes out in the coming days where he has noted that he erred in supporting these mills, I will quickly amend this post.
To me, working for one of these mills (which effectively scammed the American taxpayers: you and I) disqualifies Mr. Long from being the IRS Commissioner. There have to be more qualified individuals. Even I’m more qualified than Mr. Long!
I criticize the IRS regarding paperwork often. Indeed, the IRS has a major problem dealing with correspondence. Yet many businesses must make numerous payments by check (because that’s the only way to do so) or EFTPS. This morning, I sent a client a link to IRS Direct Pay (to make an estimated payment) and I was surprised to see a screen telling me I can make business tax payments by IRS Direct Pay.
Now, you cannot use Direct Pay for all payments, but it does allow for many:
The system allows for balance due, estimated tax, and extension payments.
Kudos to the IRS for adding another method for businesses to meet their tax obligations.
With much of the state of Florida declared a federal disaster area, the IRS this morning announced that all residents of Florida have until May 1, 2025 to file their tax returns that are on extension. This impacts not only 2023 tax returns on extension, but the 2024 filing deadline next April. Do note that interest and the late payment penalty continue for 2023 tax returns (because payments were due on April 15, 2024). This extension also means that estimated payments due in January don’t need to be made until May 1, 2025 for Floridians.
The IRS announced this morning that tax deadlines have been postponed in several counties in Illinois due to recent severe weather in the Chicagoland area:
The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). Currently, this includes Cook, Fulton, Henry, St. Clair, Washington, Will and Winnebago counties in Illinois.
Chicago is in Cook County, and Will county is just south of Chicago; thus, this extension impacts millions. Individuals impacted have until February 3, 2025 to file returns; this extension is automatic.
As of today, I haven’t seen a formal announcement yet about extensions due to Hurricane Helene. However, given the destruction in western North Carolina, and that areas of North Carolina and Florida have been declared a major federal disaster area, I expect the announcement by the IRS in the next day or two, with a similar postponement until at least February.
Yesterday, I had to call the IRS to obtain an address to mail a return to (it had to go to a special address), and discuss collection activities for another client. Unfortunately, the IRS computer system crashed. (It came back up late in the day.) This morning, I went to run some transcripts and, again, the system was down.
The main IRS computer system dates to 1959. That is not a typographical error. It is 65 years old–eligible for Social Security. It uses Fortran (a computer language that is no longer popular). I think you can see that an update is needed (something the IRS readily acknowledges). (I was in the last Computer Science 1 class at Berkeley to use Fortran with punch cards. Berkeley switched to Pascal the following quarter.)
But the IRS is dependent on Congress for budgeting, and a stable IRS budget is absolutely needed. The IRS is an agency where politics should not apply, but over the last fifteen years we’ve seen Adminstrations use the IRS for political goals (such as the Lois Lerner/conservative nonprofits scandal, targeting of reporters who were investigating the Administration, etc.). The Party that has been out of power had one method to act and express displeasure–cutting the IRS’s budget–and they did.
I don’t have an answer here, but if you wonder why the IRS has issues and why things take far longer to resolve with the IRS than they should, you have one of the reasons. At times (especially when the IRS computer is down), I assume the whole thing is held together by duct tape (it can fix everything, right?). We’ll see if by the time I start taking Social Security if the IRS has a modern (or even semi-modern) main computer system.
One of our clients made a mistake on his payroll tax deposits: He shorted the IRS $4,590. He realized his mistake, and immediately made a correcting payroll tax deposit (albeit late). There’s a penalty for this, and it’s 10% (based on the number of days his payment was late)–which he paid in advance of an IRS assessment of a penalty.
The IRS assessed a $5,327.46 penalty. That’s a penalty of 116%, quite a bit more than 10%. The IRS sent a penalty notice in late June; my client immediately sent via certified mail a letter questioning the penalty. What did the IRS do? Did they put a hold on collection activities while they investigated? Did they perform the investigation, realize that an error was made, and send a $0 amount due notice? Or did they send an Intent to Levy (CP504B) notice?
The IRS ignored my client’s response and sent the CP504B Intent to Levy notice.
This morning, I called the IRS and tried to get this resolved on the phone. The representative couldn’t–without seeing how the penalty was calculated (which he couldn’t see), he could only note we disputed it and were going to file an Appeal. This afternoon, I submitted that Appeal request online [1].
In the end, my client’s issue should be resolved without him owing additional tax or penalties; the IRS clearly erred. However, my client has to pay me for services that shouldn’t have been needed simply because no one at the IRS did anything with his correspondence. Frankly, the IRS today rarely reads their mail timely or correctly. And that’s a huge issue.
[1] The IRS recently implemented an online upload feature. This allows responding to some notices by upload. I was able to upload all the documents needed for the Appeal (including the Form 9423 Collection Appeals Form) quickly and get an immediate confirmation they were received. This is excellent, and the IRS is to be praised for this. It shouldn’t have been necessary to file this Appeal if the IRS could read mailed correspondence, but at least there are some improvements happening at the IRS.
The story you’re about to read is true. The names (and dollar amounts) have been changed to protect the innocent.
John and Mary Smith, long-time clients, filed an amended return for the 2017 tax year years ago. It took some time, but their claim for an approximate $750,000 refund was approved. Finally, in early 2023 a check was issued for $701,818.85 (the Smiths owed some back tax that the IRS correctly offset, and the IRS added interest per law).
Unfortunately, the check was returned to the IRS; the Smiths had moved and the IRS didn’t update the address. In June 2023 the IRS sent a new check for $632,825.18 (there was some additional tax to offset and the interest changed). That check, too, never arrived; the Smiths completed Form 3911 noting they didn’t receive the check. The IRS followed up a couple of months ago, and the Bureau of the Fiscal Service sent the Smiths a form to complete. It turns out that a business called Acme Auto Inc appears to have cashed the check; indeed, the copy of the check sent by the Fiscal Service shows it was made payable to Acme. Acme appears to be a real business, and the address on the check matches its address as registered with the state’s corporation commission/Secretary of State.
I can only think of three things that could cause this. First, Acme was also due a tax refund for the exact same $632,825.18, and the Fiscal Service erred and sent a copy of the wrong check. The chance of that seems about the same as it snowing today in Las Vegas.
Second, somewhere in the printing/generation of the refund the payees names (and address) got changed to Acme, and Acme deposited the check. Perhaps they were expecting a refund, or perhaps they just look at this as found money. There’s an obvious issue here: depositing money that you’re not due means that you get to pay it back with interest.
Third, the check was made payable to the Smiths and Acme (or its owner(s)) changed the payee to Acme. That’s theft, and quite illegal.
I cannot think of any other explanations for what happened. In any case, the Smiths have sent the form back to the Bureau of the Fiscal Service, and I’m certain that an investigation will determine the cause for this. Eventually (likely in early 2025), the Smiths should receive another check for about $650,000 (they will be due additional interest). As for Acme Auto, I hope that I’m wrong about what happened and the check copy we saw was simply the wrong one. Or that Acme still has that $632,825.18 around as they’ll need to pay it back. If not, they’re likely to receive a visit from law enforcement.
In mid-June I received mail from the IRS. That’s not unusual; I receive a lot of mail from the IRS (generally, correspondence for clients). But this was different: it was a check for $1.87. Here’s the check:
Now, I wasn’t expecting a refund (I owed tax, which I paid with the filing). It’s definitely labeled as a tax refund, but no explanation accompanied the check. That’s not unusual; the checks and the notice of explanations are generally sent from different offices. I ran a transcript, and there’s nothing noted on my account for 2023 that gives an explanation (no entry for $1.87). So I waited, figuring that I would receive a notice in the mail within a few weeks.
It’s now August 1st, and I still haven’t received anything. I could call the IRS up and they may see something that I don’t in my account. But it’s $1.87, and it’s just not worth my time figuring this out. Yes, there’s a possibility this refund is erroneous (indeed, I suspect that’s the case) but it’s just $1.87! Yes, we tell clients to not cash refund checks they’re not expecting–indeed, if this was $187 (rather than $1.87) I would be on the phone to the IRS to figure out what’s going on. Yes, if this refund is erroneous I may have to pay it back with interest (so that might be $1.97 in three years).
The IRS is supposed to send a notice and perhaps I’ll get one before year-end. I’m not holding my breath.
This is more humorous than anything else (because it’s $1.87), but it’s typical of the kind of issues we see. I’m currently having to appeal an erroneous late filing penalty for a client who filed his tax return on December 15th (his tax deadline) because the mailing receipt from Australia shows the date as “15/12.” (In most of the world–but not the United States–the day appears before the month.) In my letter asking for the appeal, I really wanted to say, “Does anyone consider there aren’t fifteen months anywhere in the world?” I didn’t–I kept the letter directly on point including the citation to § 7502(a)(1) of the Internal Revenue Code (which governs timely filings).
These are two examples of the IRS’s major issues with correspondence. Unfortunately, I haven’t seen any improvements this year (only regression).
As a tax professional with quite a few clients, our clients receive IRS notices. Much of this correspondence (not all, but a large portion) has to be responded to. My three most recent cases are making me think there are major issues with the IRS handling mail.
Client #1 received an Automated Underreporting Unit (AUR) notice alleging four items: two 1099-NECs not reported, one 1099-MISC, and some capital gains. We timely responded in December pointing out with backup documentation where all the alleged unreported income was on the tax return (it was all there). Earlier this month we received a notice reducing the alleged unreported items to three (one of the 1099-NECs was removed from the list). We just sent basically the same response with the same documentation to the AUR group (and hope it won’t take four back-and-forths to go through a four-item list).
Client #2 received a notice alleging a “Math Error” on his return. You have exactly 60 days to respond. We did so–and this is required to be mailed using certified mail, return receipt requested (which we did). The IRS alleged we didn’t timely respond. I sent back documentation proving we timely responded. It’s been several months, and we’re still waiting on a response.
Client #3 received a notice alleging his return was untimely filed. His return was required to be mailed; he was outside the United States and sent it with tracking from New Zealand (timely). It wasn’t received timely (but that’s the fault of the Postal Service, not my client) and doesn’t impact him; there’s a rule in tax called the Postmark Rule which governs this situation. My client has now received a letter from IRS Collections even though we disputed the entire issue months ago.
It’s not just me. If you’re a tax professional, prepare to be very depressed when you read this Twitter/X thread from a CPA in Indiana named Mike Sylvester. An excerpt:
…[The Taxpayer Advocate agent’s] case load has tripled since 2019.
She said the cases she sees now the IRS is wrong almost every time. She said The IRS correspondence system is beyond broken. Her words, not mine.
She said the IRS broke during Covid and still has not recovered.
Then the part that just floored me. Understand the long time policy of The Taxpayer Advocate is only contact them as a last resort. Try to work the problem with the IRS hard yourself first.
I told her another problem I am having and how many times the IRS and I have gone back and forth. She told me I was wasting my time and I should have opened a Taxpayer Advocate case several months ago.
She said I need to open cases faster…
I am still shocked by this.…[emphasis in original]
There is plenty more, and reading through the comments made me depressed. One comment is that there are fewer than 12 individuals working at the IRS Philadelphia Service Center to handle correspondence! My experience with the Taxpayer Advocate Service (TAS)–when they get to your case–has been excellent. However, it’s clear they are buried.
Major work is needed with correspondence, and tax professionals and taxpayers are suffering. TAS is supposed to be a last resort; it should not be a necessity most of the time. Yet it may become so (if that has not already occurred).
