How Not-for-Profits Can Navigate Backlog at the IRS

The COVID-19 pandemic caused a severe backlog at the IRS in processing returns, mainly paper-filed returns and correspondence. Many tax-exempt organizations received notices from the IRS over the past two years as a result.

Some of these notices state the IRS hasn’t yet received a return, even if the organization did in fact mail its return months earlier. Adding to the confusion, someone from the tax-exempt organization or its tax accountant calling the IRS Tax-Exempt and Government Entities Customer Account Services, could likely be subjected to a recorded message stating that due to extremely high call volume, their call can’t be taken at this time.

If a caller does get through, wait times are one to two hours or more. Difficulties in reaching the IRS occur whether the organization is trying to respond to a notice or has a question related to their filing requirements, tax-exempt status, or other issues.

Explore options to navigate the backlogs below.

Process Delays at the IRS

According to National Taxpayer Advocate Erin M. Collins in remarks made to Congress at the end of 2021, the IRS received about 282 million telephone calls in fiscal year 2021, with customer service representatives only able to answer 32 million, or 11%, of those calls.

Paper-filed returns took at least eight months to process, and responses to IRS notices and other correspondence took six months or longer to process.

In addition, the IRS had a backlog of more than 35 million individual and business returns at the end of the 2021 filing season, for 2020 returns, compared to about 10.7 million returns at the end of the 2020 filing season. Of those returns, about 16.8 million were paper-filed returns. The IRS also had a backlog of about 4.75 million pieces of paper correspondence.

IRS Temporarily Suspends Notices

The IRS announced in February 2022 the temporary suspension of several automated collection notices until it can alleviate the backlog. Taxpayers, however, still received notices in February because they were sent before the suspension. The IRS said there’s generally no need to respond to these.

Suspended Notices for Business Returns

  • Notice or Letter Number CP259, or Spanish version CP959, Return Delinquency. The IRS sends this notice when there’s no record of a prior year return being filed.
  • Notice or Letter Number CP518, or Spanish version CP618, Final Notice, Return Delinquency. This notice is a final reminder that the IRS still has no record of a prior year tax return.

The IRS also suspended several notice types for individual taxpayers.

What to Do When You Can’t Reach the IRS

This suspension of notices won’t halt all notices or the need for tax-exempt organizations to attempt to call IRS representatives or send correspondence to the IRS.

Best Practices When Filing Your Return

  • File electronically. Electronically file returns and extensions if possible. Forms 990, 990-PF, and 990-T are now required to be electronically filed. Form 990-EZ is required to be electronically filed for tax years ending July 31, 2021, and after.
  • Fax correspondence. Fax your return to the IRS whenever possible instead of sending by mail.
  • Choose return receipt requested. If returns or correspondence are mailed to the IRS, taxpayers should send those by return receipt requested and keep contemporaneous records to document what the taxpayer mailed to the IRS.
  • Avoid multiple mailings. Additional mailings only add to the backlog, so combine correspondence on the same subject.
  • Monitor the mail. Taxpayers should monitor their mailboxes for correspondence from the IRS.

IRS Resources for Not-for-Profit Organizations

When calling IRS Tax Exempt and Government Entities Customer Account Services, which can be reached at (877) 829-5500, the main option may be to simply keep trying.

Calling towards the end of the day could result in a better chance of getting through to a representative.

Below are detailed resources for the following:

  • Charities and Nonprofits
  • Exemption Applications
  • Taxpayer Advocate Services

Charities and Nonprofits Section

The IRS also suggests checking its website to see if an exempt organization can find the answers to its questions there. The IRS has a Charities and Nonprofits section, which includes information on:

  • Requirements and tips on annual filing and forms
  • Applying for an employer identification number (EIN)
  • Applying for tax-exempt status or reinstating tax-exempt status
  • The life cycle of an exempt organization
  • Charitable contributions
  • Exempt organization types
  • Education resources and guidance
  • Courses for exempt organizations
  • Subscribing to Exempt Organizations Update, a periodic newsletter for exempt organizations and tax practitioners

Exemption Applications

For organizations that applied for tax exemption, the IRS has a web page Where’s My Application for Tax-Exempt Status? The page has a section showing whether or not an exempt application has been assigned to a specialist based on the submission date of the application.

When the IRS decides an exemption status, it will mail the organization a letter. Determination letters are also posted to the Tax Exempt Organization Search. The IRS suggests checking there as well, as the determination letter may be posted before the organization receives it in the mail.

Taxpayer Advocate Service (TAS)

The TAS is an independent organization within the IRS that helps taxpayers and also advocates for systemic changes at the agency.

TAS can help tax-exempt organizations if they haven’t been able to resolve the problem with the IRS and:

  • The problem causes financial difficulties for the organization.
  • The organization faces an immediate threat of adverse action.
  • The organization tried repeatedly to contact the IRS but hasn’t received a response or hasn’t received a response by the date promised.

TAS, however, won’t accept cases that are only based on processing delays. The pandemic affected TAS as well; its caseload increased from 167,000 cases annually in fiscal year 2017 to 264,000 cases annually in fiscal year 2021.

A taxpayer seeking TAS’s assistance should complete Form 911, Request for Taxpayer Advocate Service Assistance. Find more information on Form 911 and submit a request for assistance on the TAS web page.

We’re Here to Help

For guidance on contacting the IRS or what to do about a notice you received, contact your Moss Adams professional.

You can also visit our Not-for-Profit Practice for additional resources.

Contact Us with Questions

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