The American Institute of Certified Public Accountants (AICPA) has urged the Internal Revenue Service (IRS) to refine how it uses CP53E as the agency implements Executive Order 14247 (EO 14247), Modernising Payments To and From America’s Bank Accounts.
In a letter to the IRS, the AICPA outlined concerns arising from the latest filing season, during which more than three million CP53E notices were issued. Such notices are typically sent when a taxpayer is due a refund but must provide or correct direct-deposit information before it can be released.
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The association said there was confusion over why the notices were generated, the status of refunds, and what actions, if any, recipients needed to take.
The AICPA added that missing direct deposit details were the most straightforward reason for receiving a CP53E notice.
However, the letter said notices were also sent to taxpayers who had asked that any overpayment be carried forward to the next tax year.
Some taxpayers received CP53E notices for filing returns showing either no amount owed or a balance due to the IRS, while others received notices despite having supplied valid direct deposit information.
The AICPA said taxpayers who were not anticipating a refund found the notices especially puzzling, as they often contained no explanation.
It recommended that the IRS publish clearer guidance on the situations in which a CP53E notice will be sent.
The association asked the agency to specify, for each scenario, whether a taxpayer must take any action and to explain the limitations the IRS faces when relying on direct deposit data.
The AICPA proposed that taxpayers be allowed to request an exception from the direct deposit requirement before filing their return. One option suggested was to add a checkbox to income tax forms so taxpayers could identify themselves as qualifying for an exception.
The organisation further recommended that the IRS formally set out and define all categories of excepted taxpayers through regulations or other official guidance.
It also urged the agency to introduce safeguards to stop CP53E notices being issued to taxpayers who have previously qualified for a paper refund cheque exception.
AICPA Tax Policy and Advocacy senior manager Daniel Hauffe said: “The recommendations provided by the AICPA, coupled with increasing public outreach, will help reduce confusion and protect taxpayers who are exempt from the electronic refund requirement.”
