Senators Seek Taxpayer Penalty Relief Amid IRS Backlog

WASHINGTON — Sens. Bob Menendez, D-N.J., and Bill Cassidy, R-La., are leading an effort to convince the U.S. Department of the Treasury and the Internal Revenue Service to provide penalty relief for taxpayers amid what they describe as the “extensive” and “ongoing” processing backlogs at the nation’s tax agency.

“While the COVID-19 pandemic has strained every federal agency, the impact on the IRS has been particularly severe,” Sens. Wyden, Merkley, both of Oregon, and about two dozen other senators wrote Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig this week. 

As of the end of December, they said, the IRS continued to have a backlog of 6 million Forms 1040 (Individual Income Tax Returns) and 2.3 million amended individual tax returns. 

“In addition, the IRS has 2 million Forms 941 (Employer Quarterly Tax Returns) that must be processed before the nearly 500,000 amended Forms 941 can be processed,” the senators wrote.

The lawmakers noted the delayed processing of amended returns has been particularly devastating to small businesses, whose applications for emergency loans from the Small Business Administration have been caught in limbo nearly two years after the COVID-19 pandemic began.

“Recognizing the extraordinary challenges of the COVID-19 pandemic, in addition to the IRS operating with antiquated technology and a constrained budget, we find the current situation alarming,” the senators wrote. “We stand ready to support the IRS and look forward to hearing how we can help you address any obstacles facing the agency. 

“However, we respectfully request the IRS consider the following measures to bring immediate relief to taxpayers, and reduce the backlog, during this tax filing season,” the lawmakers added. “… While we recognize no single action will alleviate issues that have resulted from difficulties at the IRS spanning administrations of both political parties, these steps would provide our constituents with greater certainty as we enter this year’s filing season.”

In addition to Sens. Menendez and Cassidy, the letter was signed by Sens. Ron Wyden, D-Ore., Jeff Merkley, D-Ore., Cory Booker, D-N.J., Michael Bennet, D-Colo., Richard Blumenthal, D-Conn., Sherrod Brown, D-Ohio, Ben Cardin, D-Md., Tom Carper, D-Del., Chris Coons, D-Del., Catherine Cortez Masto, D-Nev., Tammy Duckworth, D-Ill., Kirsten Gillibrand, D-N.Y., Tim Kaine, D-Va., Amy Klobuchar, D-Minn., Patrick Leahy, D-Vt., Cynthia Lummis, R-Wyo., Joe Manchin, D-W.Va., Chris Murphy, D-Conn., Jacky Rosen, D-Nev., Debbie Stabenow, D-Mich., Chris Van Hollen, D-Md., Mark Warner, D-Va., and Raphael Warnock, D-Ga.

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