The IRS Says You Didn’t File Your PIF or CRT Form 5227…But You Did!

We are getting accustomed to waiting longer for things these days: Waiting for baggage to come at the airport. Waiting for food to be delivered. Waiting for any device that uses a microchip. Many of the delays are due to staffing shortages. The IRS is no different.

If you have received a paper notification that you didn’t file your 2020 PIF or CRT Form 5227, you are not alone. That’s because the IRS automated notice system is working just fine. However, due to staffing shortages, the IRS is delayed in opening these and other hard copy returns. So while the automatic notice machine churns on, the real live humans are still sitting and opening envelopes trying to catch up.

What to do?

First, an ounce of prevention is worth a pound of cure. Always retain proof of mailing whenever you mail anything to the IRS.

Second, know that the IRS is aware of this problem. In fact, in a Jan. 27 announcement, the IRS stated it was suspending certain automated letters and on Feb. 9, specifically identified the letters and notices it is suspending and described their function. The CP259 business return delinquency is what many of you might have received about your 2020 Form 5227, and it is included in the list of notices to be suspended.

And yes, we are talking about the 2020 returns. The 2021 returns are due April 18, so it’s possible you might get a notice about those too.

How long the letters and notices will be suspended remains unclear. The IRS indicates it “will continue to assess the inventory of prior year returns to determine the appropriate time” to start sending the notices again, and there has been no mention of relieving taxpayers from their obligation to file returns or pay taxes that are the subject of the letters and notices if those returns and taxes are indeed unfiled and unpaid.

What should you do regarding the notices? The IRS says, “Some taxpayers and tax professionals may still receive these notices during the next few weeks. Generally, there is no need to call or respond to the notice as the IRS continues to process prior year tax returns as quickly as possible.”

If you have any concerns, contact your tax preparer, and, in the meantime, retain all of your documentation.

The good news is that while you may have to keep waiting on the IRS to open your paper return, the Form 5227 is slated to be e-fileable as early as next year. We will be sure to keep you updated!

Update as of March 25, 2022:

In their March 25, 2022 Exempt Organization Update, the IRS confirmed that the CP259F – the First Taxpayer Delinquency Investigation Notice for the Form 5227 (required for PIFs and most CRTs) – can be disregarded as long as the return was submitted on time.

“Generally, there is no need to call or respond to the notices as long as the return was filed timely,” states the IRS notice. For more details, go to https://www.irs.gov/charities-non-profits/current-edition-of-exempt-organizations-update.