Ann Arbor man wonders about $933 IRS said he was owed

Jeff Mortimer glances at the form that he's planning to fill out with the hope he might, just might, cut through a backup at the IRS to shake loose $933 that's he's been owed for what's getting awfully close to two years now.

Mortimer, a writer in Ann Arbor, doesn't miss the irony of the title — Form 911.

"That can't be a coincidence," he says, listening to classical music in his crowded home office a week before Thanksgiving.

After receiving a letter back in January that declared that he was owed $933 from the Internal Revenue Service, he's still waiting for the cash. And for nearly a year, he's had absolutely no idea how he would ever get that money.

A 911 emergency, indeed.

As for many people, money is tight.

Mortimer, 76, works freelance. He's got a pension check that amounts to $334 a month from his 20 years at the Ann Arbor News where he once worked as a sports writer among other jobs. He's got his Social Security each month and any income he can generate taking on projects, such as a book he's writing with a local entrepreneur.

Like most people, he lost a good deal of income when the economy shut down during the early part of the pandemic in 2020.

Like many older adults, he's had health issues, including daunting surgery and medical challenges in 2022.

Right now, he's struggling with some bills, including looking at a DTE bill for $380. He could have used all the money he's owed from the IRS, like yesterday.

He's turning to Form 911 as a last resort. The form is a way to ask the Taxpayer Advocate Service for assistance when one is unable to resolve tax issues through normal channels and faces undue hardship as a result of the IRS actions or inactions. Taxpayers can go to www.taxpayeradvocate.irs.gov and click on the “contact us” tab and hit submit a request for assistance.

Currently, taxpayers must submit requests by mail, fax or phone. The quickest method is by fax. The Taxpayer Advocate Service is working on developing an option for taxpayers to submit their requests for assistance online in the future.

About 10 months ago, Mortimer had some hope that the check was in the mail. But he's seen no money yet.

CP80 Notice creates confusion but oddly offers hope

He received paperwork from the IRS dated Jan. 24 — a CP80 Notice — that stated he was due a $933 credit for his 2020 tax return. "However," the notice stated, "we haven't received your tax return."

A glut of CP80 Notices hit mailboxes all across the country in January, including many sent to taxpayers who owed the IRS but already had sent a check. Yes, somehow the IRS cashed those checks but then told people they had not received a return. (The reason: Federal income tax returns are separated from the check and then returns are processed further down the line after the check has been cashed.)

The IRS initially told those taxpayers that they needed to file a copy of their 2020 return immediately. After taxpayers and others voiced their complaints, the IRS only later announced that it would "suspend notices in situations where we have credited taxpayers for payments but have no record of the tax return being filed."

None of this helped Mortimer get his money.

IRS has 3.2 million unprocessed returns

Many people who are caught up in an endless wait seem to have a few things in common with Mortimer. They collected unemployment benefits in 2020 and paid federal income taxes on those benefits when they filed their tax returns in early 2021. They filed before a key change in the tax rules took place on March 11, 2021 — or they filed without realizing that the tax rules had changed — and they're owed some money.

In some cases, like Mortimer's, a paper return was involved and then seemingly got caught up in a backload of paper that had piled up at the IRS in the past few years since the pandemic hit. While millions of old returns have been processed, a new tax season will fuel another pileup.

Others who are waiting face issues when it comes to resolving stimulus payments or recovery rebate credits.

The IRS has taken steps to decrease its massive inventory, including hiring additional employees and reassigning employees from other areas to work on the backlog. But Erin M. Collins, the National Taxpayer Advocate, noted in a blog that taxpayers and IRS employees have been stuck in a "time warp due to underfunding and understaffing."

She has noted that most paper is not scanned into computers because of an outdated IRS system. So employees "manually process the returns and correspondence, manually keystroking the numbers from each document into IRS systems digit by digit, and manually moving the returns through the entire process from receipt to storage."

The IRS indicated that processing letters or responses from taxpayers to notices that the IRS has sent out earlier is taking "longer than usual due to resource restrictions. The exact time frame varies depending on the type of issue."

As of Nov. 25, the IRS had 3.2 million unprocessed individual returns received this year, including returns filed for the 2021 tax year and those filed late for previous years. Of that group, 1.7 million returns have errors that will need to be corrected or they require other special handling, and 1.5 million are paper returns waiting to be reviewed and processed.

"This work does not typically require us to correspond with taxpayers, but it does require special handling by an IRS employee so, in these instances, it is taking the IRS more than 21 days to issue any related refund," the IRS stated on its website.

The IRS said it continues to process returns that need to be reviewed manually because of errors.

Another startling statistic: As of Nov. 26, the IRS said it had 800,000 unprocessed Forms 1040-X. Those amended returns are being processed in the order received and "the current time frame can be more than 20 weeks."

More:IRS cashed the check but asked these taxpayers to re-send returns

More:IRS sends letters to millions still eligible for generous COVID-19 tax breaks

IRS cashed the check

Mortimer figured he was owed the money. It couldn't be right, he thought, that the IRS said it had not received his 2020 return. He mailed his return to the IRS roughly a year before receiving this letter; the return was sent back in March 2021. He filed by paper, not by e-file, because the preparer who does his taxes on the side files by paper.

And the IRS cashed the check that he sent along with the return, a check for $933.

"I paid it and I didn't owe it," Mortimer said.

He even wondered: How did the IRS know in January that he was owed $933 if they didn't receive that paper return nearly a year earlier?

Mortimer knows that a big temporary tax deduction was missed when his tax preparer handled the original 2020 federal return in early 2021.

His 2020 federal return, filed in late March 2021, overlooked a valuable break for people who were unemployed during the economic fallout in 2020. He wasn't the only person to make this mistake.

The tax rules changed at a strange time in 2021, shortly after the tax season had kicked off and many had already begun preparing and filing tax returns.

Following the rules then the rule is changed

The American Rescue Plan — which was signed on March 11, 2021, shortly after tax season began — ended up excluding up to $10,200 in 2020 unemployment compensation for individuals from taxable income calculations. The exclusion applied to individuals and married couples whose modified adjusted gross income was less than $150,000. Even if you qualified, amounts over $10,200 for each individual were still taxable.

Many taxpayers overpaid because they filed returns based on old tax rules that treated all jobless benefits as taxable income. The tax break was for one year only, 2020.

Once that large chunk of money wasn't reported as taxable income, many people were owed a bigger refund or owed less in taxes.

The IRS ended up systematically correcting 14 million income tax returns that had mistakes on them relating to unemployment benefits that would not be treated as taxable for 2020. And the IRS issued a total of $14.7 billion in tax refunds relating to that issue, which covered 12 million of those returns. Some taxpayers received refunds, while others had the overpayment applied to taxes due or other debts.

The IRS mailed a letter to those taxpayers to inform them of the corrections, generally within 30 days from when the corrections were completed. It took the IRS many months to handle the recalculations, the National Taxpayer Advocate stated, which required duplicative work for millions of returns.

The IRS has not spelled out how many people, like Mortimer, are still waiting for a refund or credit relating to the change in how jobless benefits were taxed in 2020.

"The IRS is no longer performing automatic corrections of tax year 2020 accounts to allow the unemployment compensation exclusion for taxpayers who claimed unemployment compensation on their 2020 return," said IRS spokesperson Luis Garcia said in a statement.

Garcia noted that those who are entitled to the tax break for 2020 but did not see it automatically corrected could need to file an amended return to claim the exclusion. But the IRS said you should not file an amended return if you already filed one to claim the 2020 unemployment compensation exclusion.

He also suggests that taxpayers who have not received or cannot find an IRS letter or notice view their 2020 tax records through their online account at IRS.gov to track activity.

While the situation has been resolved for millions, news reports indicate that others, like Mortimer, are still waiting for their money and the 2020 situation involving the unemployment compensation to be resolved.

More:Wait for 2020 unemployment tax refunds from IRS continues| Betty Lin-Fisher

Mortimer quickly filed an amended paper return in April 2021 to try to clear up the mistake. The adjusted gross income listed on that amended return was $23,668 — and included about $6,500 in jobless benefits but excluded the amount that was now allowed to be left off the return.

But filing the amended return might have triggered some issues.

Peter Mills, senior manager for Tax Policy & Advocacy with the American Institute of CPAs, said that the IRS at one point later clarified that those who included these unemployment benefits in their taxable income by mistake on 2020 returns should not file an amended return. The IRS was to make adjustments and issue related refunds automatically.

"While some taxpayers filed their 2020 returns early, before the exclusion was signed into law, others filed after the exclusion was signed into law but were unaware of the change," Mills said.

Filing either original or amended returns on paper, he said, contributes to long processing times. "The good news is that by law the IRS pays interest on late refunds," Mills said. "Meaning, affected taxpayers will be ‘made whole’ when they receive their money – assuming the refund was not applied to other debts.”

Many find it hard to understand where to turn next

About nine months after filing that amended return, Mortimer received that CP80 notice indicating he was owed $933. He's not sure if the CP80 notice reflects that he sent a check when he shouldn't have, but that seems to make some sense.

He knows he sent $933 — a check that was cashed — and the IRS told him he is due a $933 credit.

Can he find an easy answer out of this mess? No, not at all. After he reached out to me via email in early November, I suggested that he contact the Taxpayer Advocate Service, an independent arm of the agency designed to help taxpayers resolve problems.

He has been dealing with health problems the past year but did try to solve the problem by going to the IRS website at IRS.gov and making phone calls to the IRS. He hit nothing, he says, but a dead end.

The "Where's My Refund?" tool on the IRS site would read: "Refund status results, we cannot provide any information about your refund."

He clicked on a link to check on his amended return. But that site indicated that information on his amended return was "currently unavailable in this application."

"When I called the 800 number and selected 'refunds,'" he said, "it was the same drill."

After he supplied his information, the system told Mortimer it didn’t have any information on a refund and directed him to the IRS website.

"When I selected 'all others,' I was asked for a password. When I selected 'inquire about a notice,' I got a robot who couldn’t understand my question," Mortimer said.

Then he called the number listed on the website for the nearest IRS office, which is in downtown Detroit, nearly 50 miles away.

"I got two minutes of useless information, including being directed to the website five or six times, and then was told everyone was too busy to talk to me and try again next business day. Which is today, but I’m writing to you instead," Mortimer said in his first email to me on Nov. 8.

He cannot understand how he can get a letter from the IRS back in January about being owed money but then not have that money in hand by November and now December.

"It seems pretty incompetent," he told me when I visited him in Ann Arbor in November. "I don't know a polite way of saying it. This is a screwup. And I was pretty excited when I got this," referring to the January notice.

He thought the money would somehow show up after he did what he was told to do.

When he received the CP80 notice, he said he got right on it and sent out a copy of his return in January and he enclosed a copy of the amended return, the one which showed $933 due.

Nothing happened.

"Now what? Every door has been slammed in my face," he said.

He says he's tried to do what he was told to do but he's getting nowhere. All he has is the notice from January indicating that he's owed money. But he has no money.

"There have been times that this has felt like a second job," Mortimer said.

Matt Hetherwick, director of individual tax programs for the nonprofit Accounting Aid Society in Detroit, said there could be all sorts of reasons why the IRS hasn't sent the money yet.

"If they haven't processed the tax return, then they don't know what to do with the credit," Hetherwick said.

"Unfortunately the backlog of paper documents that the IRS has had to process since the pandemic wreaked havoc," Hetherwick said. "Plus the shortage of staff has created a lot of challenges for tax filers." The Accounting Aid Society also agreed to take a look at Mortimer's situation.

Mortimer mailed the Form 911 on Nov. 18, sending it via certified mail. And he received a confirmation that it was received Nov. 23. He got a call from the Taxpayer Advocate Service on Dec. 1.

The bottom line of that conversation is that he isn't looking at an immediate fix but he might receive his money in about 45 days — which is rougly a year after he received his CP80 notice and nearly two years after he filed his 2020 federal income tax return.

The Taxpayer Advocate Service notes online that it is currently working with taxpayers who have unprocessed income tax returns for the tax year 2020 and earlier that were filed by mailing a paper return to the IRS. This effort involves returns that the IRS has not yet entered into its systems.

Mortimer said he was told that the amended return, sent by mail in April 2021, was not processed. And the Taxpayer Advocate Service staff member would have to send a request to the IRS to go ahead and process it to release his refund.

"I asked her the familiar question — if they hadn't processed my return, how did they know I had that credit?"

He said she responded: "That's one of the wonders of the Internal Revenue Service. ... I can see the return and it wasn't completely processed for whatever the reason may be."

Mortimer is expected to touch base again with the Taxpayer Advocate Service on Jan. 31 to get an update on how much progress is being made.

Mortimer said he told the woman: "I don't think I can sigh deeply enough." Not surprisingly, even she had to laugh a bit at that one.

Mortimer told me that he would have never known about the Taxpayer Advocate Service if I had not suggested it to him. He even went back to the IRS website to see where the service is listed.

"If you scroll down to the bottom of the homepage, there are a bunch of lists, one of which is headed 'Know Your Rights,'" he said.

There, the second item is "Taxpayer Advocate Service."

"That's it," he said. "In other words, you can't find it unless you're looking for it, and you wouldn't be looking for it unless you already knew about it. This seems like a deficiency to me."

Contact Susan Tompor: stompor@freepress.com. Follow her on Twitter @tompor. To subscribe, please go to freep.com/specialoffer. Read more on business and sign up for our business newsletter.

This article originally appeared on Detroit Free Press: Man waits for $933 after unemployment tax issue on 2020 return