IRS Audit Landscape Amidst the COVID-19 Pandemic: A Comprehensive Overview

The COVID-19 pandemic has significantly impacted various aspects of our lives, including the operations of the Internal Revenue Service (IRS). This analysis delves into the effects of the pandemic on IRS audits, drawing insights from two key sources:

1. GAO Report: How the Pandemic is Changing the IRS (https://www.gao.gov/blog/how-pandemic-changing-irs)
2. IRS News Release: IRS Update on Audits (https://www.irs.gov/newsroom/irs-update-on-audits)

Suspension of In-Person Audits and Shift to Virtual Processes

At the onset of the pandemic in March 2020, the IRS temporarily suspended all in-person enforcement activities, including audits. This suspension extended to mail-based activities due to the closure of IRS mail processing facilities.

To adapt to these challenges, the IRS implemented various virtual processes and technologies, such as video conferencing and e-fax, to facilitate remote interactions with taxpayers. For some audits, IRS staff conducted meetings with taxpayers outdoors.

Interruptions and Backlogs in Enforcement Caseloads

The pandemic-related disruptions to mail, phone, and print operations led to delays and backlogs in IRS’s enforcement caseloads. Examiners faced significant work backlogs, new process challenges, and reduced staff availability.

In July 2020, the IRS decided to freeze sending new enforcement-related notices to taxpayers to catch up on processing older notices. As a result, some IRS notices were delayed until November 2020, pushing the resulting casework into 2021.

Increased Enforcement Caseloads Post-Resumption

After enforcement programs resumed, enforcement caseloads increased from June 2020 to June 2021. However, not all activities have returned to their pre-pandemic levels.

Expansion of Self-Help Options for Taxpayers

The IRS has introduced an online text chat service as a successful change to its operations. This service allows taxpayers to authenticate their identities, send documents, and resolve specific account issues.

Lessons Learned and Potential Permanent Changes

The IRS has acknowledged that many enforcement activities were not telework-ready due to their reliance on paper processes. The agency plans to move towards more digital processes in the future.

The IRS has also recognized the benefits of expanding self-help options for taxpayers. Virtual communication and digital processes have proven effective during the pandemic, and the IRS is assessing these lessons for potential permanent improvements.

The COVID-19 pandemic has had a significant impact on IRS audits. The agency has adapted to these challenges by implementing virtual processes and expanding self-help options for taxpayers. While some enforcement activities have not fully recovered to pre-pandemic levels, the IRS is committed to improving its operations and ensuring fair and efficient tax enforcement.