The Inner Income Service must make adjustments in its administration of taxpayer accounts to scale back the backlog of hundreds of thousands of unprocessed tax returns, in keeping with a brand new report.
The report, launched Wednesday by the Treasury Inspector Basic for Tax Administration, discovered that the backlog of outdated stock within the IRS’s Accounts Administration perform has been an ongoing problem for the IRS. That’s along with the issues stemming from the COVID-19 pandemic, which closed many IRS amenities in 2020, and up to date pandemic-related tax legislation adjustments, which solely additional exacerbated the outdated stock. As of Nov. 20, 2021, the IRS reported having 7.Eight million instances in its Accounts Administration stock, with 56.8% of the stock being “over-aged,” in keeping with the report.
Current estimates from different sources have put the quantity at 20 million unprocessed tax returns from 2020, though IRS Commissioner Charles Rettig instructed a congressional listening to final week that the IRS would compensate for the backlog by the top of the 12 months. The IRS plans to rent 10,000 workers over the approaching 12 months and just lately obtained a $675 million funding increase from Congress that it goals to make use of to enhance taxpayer service (see story).
Inner Income Service headquarters in Washington, D.C.
Samuel Corum/Bloomberg
The TIGTA report examined the workings of the Accounts Administration perform, which is accountable for serving to each particular person and enterprise taxpayers with questions on tax legal guidelines and tax accounts, making changes to taxpayer accounts when vital. Nevertheless, it discovered that delays in working correspondence elevated the burdens on taxpayers and prices to the federal authorities. The IRS paid $166.four million in curiosity between Aug. 14, 2020, and Aug. 26, 2021, simply to take care of some amended tax returns. The time it takes Accounts Administration to work on a taxpayer’s request contributes to the quantity of curiosity the IRS needed to pay, TIGTA identified.
The report really useful that the IRS redirect a number of the tax account correspondence and replies to IRS letters to the IRS’s Accounts Administration campus help websites as a approach to enhance taxpayer service. TIGTA discovered it took tax processing facilities 53 days longer than the campus help websites to obtain, course of, and scan correspondence into the Accounts Administration stock.
Know-how enhancements would assist too if the IRS would implement them. “Increasing choices for taxpayers to correspond with the IRS electronically can even cut back the time it takes for correspondence to succeed in Accounts Administration,” mentioned the report. “The IRS’s Taxpayer Expertise Technique consists of plans to develop providers to permit taxpayers to supply paperwork to the IRS digitally. Nevertheless, IRS administration indicated there isn’t any deliberate implementation date inside Accounts Administration.”
To take care of the backlog this tax season, the IRS has been organising so-called “surge groups” from different elements of the company to assist with tax return processing and telephone calls. However that might properly backfire too.
The TIGTA report famous that many Accounts Administration workers break up their time between working Accounts Administration instances and answering IRS toll-free phone calls. However as name volumes improve, fewer assets are then obtainable to work on the outdated stock in Accounts Administration. TIGTA estimated that the Accounts Administration perform might shut all the instances in its stock as of Oct. 1, 2021, in roughly seven months if all its workers have been devoted to engaged on the stock.
One other drawback TIGTA discovered is that Accounts Administration stock reporting among the many Accounts Administration websites is incomplete and inconsistent. TIGTA mentioned it issued eight alerts to IRS administration throughout its evaluation. IRS administration took actions to handle 4 of TIGTA’s alerts, together with offering extra assets to assist with the scanning backlogs on the tax processing facilities, rising staffing at a brand new campus help web site in Fresno, California, implementing processes to supply well timed screening of correspondence, and verifying stock reporting for all 10 of the Accounts Administration websites to identify any stock reporting inconsistencies and errors.
TIGTA made 19 suggestions within the report back to the IRS, together with that the IRS redirect the receipt of correspondence to its campus help websites, prioritize the implementation of instruments that allow taxpayers to instantly add paperwork into Accounts Administration’s stock, think about establishing a separate program that solely works Accounts Administration stock, and modify and enhance the reporting of Accounts Administration inventories.
The IRS agreed with 16 of the 19 suggestions, however IRS officers don’t suppose it could be possible to get the elevated staffing they would wish to accommodate shifting all of the Accounts Administration correspondence to the campus help websites. IRS administration additionally didn’t comply with replace or get new scanning software program or implement adjustments to the Accounts Administration stock report.
“With the 2022 submitting season now underway, our Accounts Administration perform remains to be dealing with unprecedented stock ranges, which continues to contribute to excessive name volumes and associated inquiries,” mentioned Kenneth Corbin, commissioner of the IRS’s Wage and Funding Division and chief taxpayer expertise officer on the IRS, in response to the report. “Regardless of regular progress, Account Administration’s present inner assets aren’t adequate to beat this problem with out important efforts. We’re at the moment working to determine an Stock Surge Group that can assist us handle this stock, recuperate from this problem, and enhance the general taxpayer expertise.”
The IRS just lately deployed a brand new expertise instrument to assist it overcome its backlog of unprocessed returns. “What makes me extraordinarily optimistic is that the IRS has constructed a instrument to undergo these, and I believe they’ve reported that within the final two to 3 weeks they’ve diminished that backlog by a superb 40%,” mentioned Brian Schmidt, CEO of Inexperienced Dot’s Tax Merchandise Group, which is likely one of the largest tax processors within the U.S. and just lately processed roughly 44% of all refunds issued by the IRS. “I nonetheless consider that’s one thing they’ll handle by means of with this new instrument. That being mentioned, there may be nonetheless elevated threat this 12 months for some delays for taxpayers, however I stay bullish the IRS will get by means of that, although some taxpayers shall be impacted by that delay.”
He cited figures from the IRS estimating the brand new instrument diminished the backlog over the previous two to 3 weeks from roughly 10 million returns to six million. “I consider they’re in a lot better form this 12 months in addressing that backlog and serving to with it,” mentioned Schmidt. “That’s why I’m optimistic.”