“Brown boxes.” Wallpaper Flare

June 8, 2020; Law360

For those who have finally had the chance to enjoy reasonably rapid turnaround on applications to the Internal Revenue Service (IRS) to achieve nonprofit status, they may have been wondering what the heck happened during the last few months. It turns out that for about a month during April and the end of March, the agency stopped processing all paper applications, along with nonprofit information returns.

According to a report on IRS data compiled by the House Ways and Means Committee, as of mid-May, the agency had a backlog of about 10 million unopened pieces of mail, including nearly 5 million tax returns.

The other 5 million unopened mail items included payments, payment vouchers, general correspondence and information returns, according to the report.

While the lack of transparency that this was happening is distressing, and the delays for would-be tax-exempt organizations surely annoying, we would be remiss if we didn’t note these delays might be far more serious for families who were trying to make sure their filing was current in order to qualify for CARES Act stimulus payment checks. (While the number is surely lower by now, as of mid-May, CBS News reported an estimated 20 million American lacked stimulus checks for which they were entitled).

Margaret Von Lienen, director of exempt organizations in the agency’s Tax Exempt Organizations and Government Entities division, says the agency was “required to scale back mail processing functions to comply with the social distancing recommendations.”

“The IRS has continued to receive and store mail,” Von Lienen says, “but we have reduced responses to paper correspondence.”

Von Lienen says the IRS has since resumed processing those applications, but those who want to check the status of their Form 990 submissions should still expect delays.—Ruth McCambridge