IRS mails incorrect collection notices to taxpayers in disaster areas

The Internal Revenue Service has been sending out erroneous collection notices demanding taxpayers in federal disaster areas pay up, even though they’re supposed to get extra time.

National Taxpayer Advocate Erin Collins addressed the problem on her blog Tuesday and Wednesday, pointing out that the fourth page of the CP14 balance due notice basically tells taxpayers they can ignore the information on the first three pages.

“Short answer: Disaster area taxpayers can ignore the CP14 collection notice,” says Collins. “The payment due date on the collection notice is wrong.  The correct payment due date is stated on the disaster declaration.”

The warning comes as wide swaths of the country have been enduring record-shattering heat waves, along with widespread flooding this week in Upstate New York and Vermont. The IRS’s disaster relief page lists a number of federal disaster areas that have qualified for tax relief earlier this year, including parts of Alabama, Arkansas, California, Florida, Georgia, Indiana, Mississippi and Tennessee. 

However, the IRS is prompting taxpayer confusion by sending CP14 balance due notices to taxpayers who live in disaster relief areas and still have months of extra time to pay, according to Collins.

“To their surprise and dismay — and contrary to IRS guidance and press releases — those taxpayers are now receiving ‘notice and demand’ collection letters from the IRS telling them their payments are currently due and the IRS will begin to charge interest and penalties if the taxpayer doesn’t pay by a specified date on the notice which is months earlier than IRS guidance permits,” she wrote. “Confused taxpayers and practitioners are wondering why they are receiving a balance due notice since they live in a disaster relief area and had months of additional time to pay.”

To rectify the problems, the IRS sent follow-up notices last month to taxpayers in disaster areas reminding them they had more time to pay their taxes (see story).

“The IRS is working hard to improve our operations as part of our new Strategic Operating Plan,” said IRS Commissioner Danny Werfel in a statement. “We know our initial mailing caused confusion for taxpayers and tax professionals, and we worked quickly to send a follow-up reminder to help reassure people. This mailing reflects how we’re trying to be more taxpayer-focused given the additional resources that we’ve been given under the Inflation Reduction Act.”

Collins said the IRS should issue more accurate notices in the future and she urged Congress to make legislative changes to resolve the issue across the board, as opposed to one disaster at a time. She also acknowledged that the IRS’s antiquated technology is partly responsible for delays in updating and reprogramming its systems to avoid sending out the confusing notices.

“In the future, when the IRS postpones filing and payment deadlines for taxpayers affected by disasters, I recommend the IRS reprogram its systems to delay the issuance of the notice, including Notice CP14 mailings, or provide the correct due date on page one of the notice,” she wrote, adding, “As the IRS continues to mail notices with incorrect dates to these taxpayers in the disaster relief areas, it will continue to cause confusion, and I suspect it will increase calls to the IRS and to taxpayers’ return preparers.”