The Inside Income Service had a backlog of over 17 million unprocessed tax returns from final yr as of early February because the company copes with an unprecedented workload in the course of the present tax season, prompting it to reverse plans to shut a processing heart in Austin, Texas.
Nationwide Taxpayer Advocate Erin Collins testified throughout a Senate Finance Committee listening to Thursday concerning the challenges going through the IRS, alongside officers from the American Institute of CPAs and the Authorities Accountability Workplace, which issued a report Thursday on the tax-filing scenario on the IRS.
Collins reported that as of early February 2022, the IRS had in its stock about 17.6 million tax returns and about 5.9 million items of taxpayer correspondence/Accounts Administration circumstances (excluding amended tax returns) that require handbook processing. As of Feb. 14, 2022, the IRS web site reported that “all paper and digital particular person refund returns obtained previous to April 2021 have been processed if the return had no errors and didn’t require additional assessment,” however Collins famous that by implication, meaning returns filed way back to April of final yr are nonetheless awaiting processing.
“In releasing my Annual Report back to Congress, I stated that paper is the IRS’s Kryptonite and that the IRS remains to be buried in it,” stated Collins in her opening assertion. “There is no such thing as a doubt that paper processing stays the company’s largest problem, and that may proceed all through 2022. As of late December 2021, the IRS nonetheless had backlogs of 6 million unprocessed unique particular person returns (Kind 1040 collection) and a couple of.three million unprocessed amended particular person returns (Kinds 1040-X) — with some return submissions courting again a minimum of to April and plenty of taxpayers nonetheless ready for his or her refunds 10 months later. As well as, greater than 2 million employer’s quarterly tax returns (Kinds 941 and 941-X) remained unprocessed.”
Nationwide Taxpayer Advocate Erin Collins testifying earlier than a congressional committee in October 2020.
Tasos Katopodis/Bloomberg
The GAO report additionally offers figures as of final December. It discovered the IRS decreased the backlog of prior-year returns, however as of late December 2021, it had about 10.5 million returns to course of from 2021. “For the present submitting season, IRS might want to course of the remaining returns from 2021 together with incoming returns from 2022 and will have to depend on time beyond regulation to take action,” stated the report. “IRS additionally expects about 21 million returns to be stopped for errors related to latest tax legislation modifications.”
The Skilled Managers Affiliation, a gaggle of IRS managers, just lately estimated the backlog to be practically 24 million returns, in keeping with the Washington Publish.
These backlogs are making life tough for taxpayers. “Residents deserve a accountable and responsive tax system that treats taxpayers pretty and well timed,” stated Collins.
The IRS is coping with staffing shortages which can be prompting the company to shift round staff from division to division to deal with the telephones. In 2021 the IRS answered extra telephone calls than in recent times, however taxpayers nonetheless had a tough time reaching IRS as a result of excessive name volumes, the GAO reported. The IRS expects customer support representatives to reply about 35% of incoming calls in the course of the 2022 submitting season. To assist handle excessive name volumes, the IRS is urging taxpayers to entry its on-line instruments like “The place’s My Refund” to get their refund standing info. However the GAO famous that the software gives restricted info on refund standing and delays. The GAO’s preliminary observations point out the IRS has no plans to modernize “The place’s My Refund,” though this might assist IRS higher serve taxpayers, decrease name quantity, and scale back prices.
“IRS struggles to stability competing calls for for phone and written correspondence as a result of many employees are chargeable for each duties,” stated Jessica Lucas-Judy, director of strategic points on the GAO. “Additional, when taxpayers can’t discover the data that they want utilizing on-line sources, they name or they ship mail. To assist deal with rapid wants, IRS transformed seasonal employees to everlasting hires, rehired former employees, and used a streamlined hiring strategy. Our ongoing assessment signifies the IRS encountered challenges hiring sufficient new returns processing employees throughout fiscal yr 2021. Attrition affected future staffing. The attrition charge for returns processing employees was greater than twice the company’s total charge. We acknowledge time beyond regulation is a obligatory software to assist handle surprising surges in workload, nevertheless it’s not sustainable to rely totally on time beyond regulation to offset complicated human capital challenges similar to decreased staffing ranges and attrition.”
The AICPA voiced the considerations of tax professionals concerning the present tax season.
“I’m right here immediately as a result of there’s nonetheless time to salvage this submitting season,” stated Jan Lewis, chair of the AICPA Tax Government Committee. “Over the previous a number of years, we’ve skilled quite a lot of service points with the IRS, most of which relate to misguided notices, gradual processing of returns and written correspondence and issue reaching the IRS by phone. These issues have been magnified the previous two years, and at occasions we as CPAs are powerless to assist our purchasers navigate these IRS service points.”
She pointed to the IRS’s latest announcement that it could droop a few of the automated notices which were going out to taxpayers from the IRS’s pc programs, however not all of them (see story).
“The AICPA appreciates that the IRS appears to be listening and responding to the collective frustrations of all taxpayers,” stated Lewis in her opening assertion. “Taxpayers, practitioners and IRS will profit from decreasing pointless contact that may consequence from the discover suspensions. Nonetheless, we should urge the Service to maneuver as rapidly as doable to supply all doable, affordable measures of aid as we’re already within the beginnings of tax busy season.”
Additionally on Thursday, the IRS introduced that it could reverse plans to shut its Austin, Texas processing heart, which had been the topic of a latest report from the Treasury Inspector Common for Tax Administration (see story).
The Nationwide Treasury Staff Union, which represents IRS staff, had urged the IRS as early as Might 2021 to rethink its plan to shut the submission processing operation in Austin as a result of the company was already fighting backlogs and staffing shortages.
“We applaud the IRS for lastly recognizing that these staff in Austin are important to the company’s means to dig out from the backlog of returns and correspondence, and that there’s an ongoing want for the IRS to retain this capability,” NTEU nationwide president Tony Reardon stated in a press release. “This resolution, though later than we’d have favored, permits staff in Austin to cease worrying that their jobs had been about to vanish, and as an alternative concentrate on delivering a profitable submitting season, the third of the pandemic.”
Members of Congress had additionally objected to the closure.
“I’m gratified that the IRS acted expeditiously to our calls and is not closing the processing facility in Austin,” stated Rep. Invoice Pascrell, chairman of the Home Methods and Means Oversight Subcommittee, in a press release. “The IRS is already racked by delays and this closure would have added additional dysfunction and chaos for tens of millions of taxpayers. Tax-filing season is already nerve-racking sufficient and the IRS should do all it could actually to make the method higher. This can be a useful begin.”
Sen. Bob Menendez, D-New Jersey, famous that he had known as the IRS on Thursday to ask it to not shut the processing heart. “In the present day, I urged the IRS to not shut its processing heart in Austin, TX given how this could have an effect on ITIN candidates & all taxpayers,” he tweeted. “I’m glad the IRS listened to my name & that it’ll as an alternative keep centered on addressing processing backlogs & enhancing its customer support.”
Democrats on the Senate listening to pushed for will increase within the IRS price range to rent extra employees and enhance the IRS’s growing old know-how. “The IRS will get quite a lot of mail, and a few of it consists of bodily checks despatched by taxpayers,” stated Senate Finance Committee chairman Ron Wyden, D-Oregon, in his opening assertion. “The issue is, the machines that scan and type that mail are old-fashioned and unable to correctly deal with the envelopes that include checks. This value the taxpayer greater than $56 million {dollars} in 2021 alone as a result of the IRS was unable to open the proper envelopes and course of the funds in time. So, in the long term, failing to spend money on IT upgrades doesn’t save taxpayer {dollars}, it prices them.”
Senate Republicans need the IRS to concentrate on fixing the issues. “Many Individuals await final yr’s tax refunds,” stated Sen. Mike Crapo, R-Idaho, the rating Republican on the Senate Finance Committee. “Many Individuals await any response to correspondence they despatched the IRS, in lots of cases many months in the past. Many Individuals have obtained incorrect or outdated info from the IRS, or have been topic to improper collections or different adversarial actions just because the IRS doesn’t know they’ve filed a return or responded to a discover. Many Individuals can’t obtain correct solutions to fundamental questions, like how lengthy it can take to obtain their tax refund or a solution to their correspondence.”