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Powell Tax Law Blog

4 min read
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Navigating 2024 IRS Challenges: Why Hiring a Tax Attorney Matters More

Some things never seem to change as the taxpayers found themselves facing a familiar challenge this 2024 tax season: dealing with the Internal Revenue Service (IRS).

“While the IRS has made some progress in addressing its backlog and improving customer service since the height of the pandemic, many taxpayers still struggle to navigate the complex world of taxes and resolve issues with the agency,” said Texas tax attorney Steve Powell.

Hiring an experienced tax attorney has become more crucial than ever when presented with IRS-related issues.

IRS Makes Strides but Backlogs and Service Issues Remain

Recent reports indicate that although the IRS has made strides in reducing its backlog, there are still millions of unprocessed returns and correspondence from the previous tax years.

“Despite the IRS's success in eliminating its backlog of paper-filed Forms 1040, backlogs in processing amended individual income tax returns (Forms 1040-X), amended business tax returns and correspondence continued,” wrote National Taxpayer Advocate Erin M. Collins in her 2023 Annual Report to Congress released in January 2024.

Collins highlighted the following:

  • At the end of calendar year 2019 (the most recent pre-pandemic year), the IRS's backlog of unprocessed amended returns stood at 0.5 million. By comparison, the backlog as of late October 2023 was 1.9 million – nearly four times as much.

  • In addition, the percentage of correspondence cases classified as "overage" in 2023 reached its highest level in recent years, with nearly 70 percent of pending cases exceeding normal processing times as of late October.

  • Delays in processing amended returns and correspondence harm taxpayers because processing delays cause delays in issuing refunds.

“The IRS has implemented several initiatives to enhance its services, such as hiring more customer service representatives and upgrading its technology. However, taxpayers continue to face difficulties in reaching IRS representatives and resolving their tax issues promptly,” said Collins.

This ongoing challenge highlights the importance of seeking professional help when dealing with IRS-related matters.

The reality is that the average taxpayer still has trouble reaching the IRS via telephone with IRS employees answering only 29 percent of all calls received during the full fiscal year.

IRS Resumes Automated Collection Activity

One of the most perplexing IRS issues for taxpayers, automated collection activity, is back in the spotlight in 2024 as the IRS announced on Dec. 19, 2023 that the agency would resume collection notice activity, and subsequent collection enforcement, on years prior to the 2022 tax year.

“The IRS has been mostly on hold with its automated collection activity since the start of the COVID-19 pandemic in March 2020, with only short periods of notices and enforcement to tax debtors at the end of 2023 for 2022 tax year balances,” said Accounting Today.

Bottom line: the resumption of automated collection activity translates to more IRS collection enforcement actions such as tax liens and levies.

“Your typical IRS audit doesn’t take place in person but arrives in your mailbox in the form of a letter requesting documentation to resolve outstanding questions the IRS has about your return,” explained Powell. “These IRS letters inevitably include a “tax amount due” the IRS believes you owe the government, but this amount often is incorrect because of an IRS error or an oversight on your tax return.”

Hiring a tax attorney can provide the average taxpayer with a powerful ally to stave off collections and/or judgements triggered by these automated letters.

IRS Wants You to Pay Taxes on Your Crypto

Comprehending the convoluted U.S. tax code would be hard enough if it was static, but each year there are numerous changes made that may affect taxpayers and their returns.

For the 2024 tax season, taxpayers should have noticed new questions on cryptocurrency and other digital assets.

“The IRS has revised the question it has asked in recent years about income from digital assets such as cryptocurrency on the Form 1040 for individual taxpayers, as well as adding it to Forms 1041, 1065, 1120, and 1120S,” reported Accounting Today.

The American Bar Association (ABA) summarized in 2023 the digital currency question as:

  • All individuals filing U.S. Form 1040, 1040-SR, and 1040-NR must answer “Yes” or “No” to the digital asset question: “At any time during 2022, did you: (a) receive (as a reward, award, or payment for property or services); or (b) sell, exchange, gift, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?” In IR-2023-12, the IRS has provided guidance on how to answer this question.

  • Digital assets are described in the guidance as digital representations of value that are recorded on a cryptographically secured, distributed ledger, and they include convertible virtual currency and cryptocurrency, stablecoins, and non-fungible tokens (NFTs).

  • Many digital asset transactions require a “Yes” answer, including receiving digital assets as payment for property or services, using digital assets to acquire property or services, receiving digital assets as a reward or award, and gifting digital assets.

  • A “No” answer is correct if during the taxable year the taxpayer merely holds digital assets, transfers digital assets between accounts owned by the taxpayer, or purchases digital assets with U.S. or other real currency.

“While the utility of digital assets is much debated, there is little debate over whether engaging in transactions with digital assets creates challenging tax compliance issues for taxpayers,” said the ABA.

Texas 1 of 12 States in IRS Direct File Test Program

Many Texans were unaware that for the 2024 tax season, Texas was 1 of 12 states that was part of the IRS Direct File Pilot program.

“As part of the Inflation Reduction Act implemented in August of 2022, Texas is one of 12 states the IRS has announced will be able to file using the new Direct File Pilot program that could potentially offer 3.8 million Texans fast and free online assistance when filing their 2023 tax return. This is the first time the IRS has provided a direct online filing option. The new program is available for simple tax returns,” reported Houston Public Media.

IRS representative Clay Sanford told the media outlet that there were limits to who can use the program with those who itemize, or those who made more than $79,000 in 2023, not candidates.

The program is now closed for the season, but Texas taxpayers should keep an eye on the IRS to see if the program is reopened in the future.

Skilled Tax Attorneys Can Help Navigate IRS Issues

A skilled tax attorney can help taxpayers navigate a wide range of IRS-related issues, including:

  • Resolving back taxes and wage garnishment.
  • Representation during IRS audits.
  • Filing amended tax returns.
  • Innocent spouse relief.
  • Installment agreements and offers in compromise.
  • Penalty abatement.

“It does not matter what your opinion of the IRS is or how you feel about federal tax statutes, but an IRS issue is something that needs to be taken very seriously,” says Powell.

Tax attorneys have access to dedicated practitioner lines, increasing the likelihood of reaching an IRS representative and expediting the resolution of your tax matters.

If you find yourself grappling with IRS-related issues, don't hesitate to seek professional assistance.

Contact Powell Tax Law today in The Woodlands or San Antonio for a free and confidential consultation. Our experienced legal team is here to help you navigate the complexities of the tax system and resolve your IRS problems efficiently and effectively.