You paid your 2023 taxes. Why is the IRS saying you didn't?
Story by Susan Tompor, Detroit Free Press
Imagine opening a letter from the IRS in early June that says you owe $6,000 in federal income taxes for 2023. Except you paid that bill. On time, mind you. And now, the IRS is sending you a notice demanding you pay up?
One Michigan senior was told just that. Others elsewhere are getting the same kind of letter saying they owe, in some cases, thousands of dollars in unpaid taxes. Except they wrote the checks and paid the money.
It's a massive mess but one that's bubbling up only in tax circles. As of June 10, the Internal Revenue Service didn't issue any news releases saying, hey, we sent out a bad batch of letters.
Before you write another check, though, take a step back, do a little research and see if you're one of many who could be dealing with a big IRS glitch.
No, it doesn't seem that the IRS lost the check. Check your bank statement. The feds could indeed have what you owe. Rather, it seems there's some problem at the IRS involving erroneous notices in 2024.
Tax professionals say they're hearing from plenty of clients in 2024 who are wrongly receiving CP14 notices that spell out what someone owes for taxes. Except − I repeat myself − they wrote the check and already paid their taxes.
One can only imagine the blood that's boiling in some homes.
The IRS did not respond to questions about the letters as of Tuesday afternoon.
The issue seems to involve some taxpayers who wrote a check to pay what they owed for their federal income taxes. Tax professionals have seen situations where the IRS has sent out a notice before applying the payment, according to the American Institute of CPAs.
In some cases, one CPA said the IRS appeared to be crediting the paper check to the account when the IRS processed the check, not when the check was mailed as it should have done.
One CPA said the erroneous CP14 letters that some clients received involved situations in which the IRS did not apply 2023 estimated tax payments correctly, and in some cases didn't apply the 2023 tax due payment. As a result, the IRS notice incorrectly showed a large tax due, along with penalties and interest.
Naturally, any IRS letters are alarming. Typically, tax professionals say their approach has been to write a polite response letter to the IRS and submit proof of payment.
George Smith, a CPA with Andrews Hooper Pavlik in Bloomfield Hills, Michigan, said six clients received these letters this month.
Smith said all of the erroneous IRS letters he saw were dated June 3 and sent out of an IRS office in Holtsville, New York, on Long Island. "It was weird, they all came in a flurry," Smith said.
One client supposedly owed $6,000 and another supposedly owed $1,300.
Except, they paid what the IRS said they owed.
These clients also made estimated federal income tax payments throughout 2023, but Smith said the IRS letters he saw reflected only what that IRS said was the remaining balance still due for 2023. So, he believes that the estimated payments made earlier in 2023 were properly credited in those cases.
It's his understanding that the erroneous letters are being sent only to taxpayers who paid their taxes to the IRS via a paper check. Other tax professionals in his office said a few of their clients received similar erroneous letters, too.
He doesn't believe the problem has cropped up for taxpayers who paid the IRS online or via a direct payment from their bank accounts.
The taxpayer sees that their check cleared their bank accounts even though the IRS has issued a CP14 notice saying they did not receive the payment.
"It's annoying," Smith said. "And it created anxiety for my clients."
He'd suggest that do-it-yourself taxpayers who get these letters respond to the IRS, as well, and include proof of payment. His clients weren't able to get a copy of the canceled check, as the IRS uses an ACH clearing process, so they sent a copy of the bank statement.
The clients mailed the checks on or before the April 15 tax deadline. And he says their payments all cleared on April 19.
California-based Spidell, which offers tax professionals updates and information, posted an alert on June 7 that indicated erroneous IRS letters were being mailed out.
"We’ve received inquiries from numerous tax professionals," Spidell stated, "asking why their clients are receiving CP14 notices indicating a balance due even though the clients can substantiate they timely paid all tax due."
According to Spidell, the "IRS confirmed that there is a nationwide delay in processing payments, resulting in erroneous balance due notices being sent when there is in fact no tax due."
Spidell said the IRS was advising tax professionals and their clients to wait six to eight weeks to see if the problem resolved itself and see if payments were properly credited to accounts.
But if the payments are not posted after that, Spidell said, the tax professional or client will have to provide proof of payment to the IRS to ensure that no penalties are imposed.
Some tax professionals, like Smith, are simply sending out letters and confirmation of those payments now to avoid any hassle.
You paid your 2023 taxes. Why is the IRS saying you didn't?
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