The Inside Income Service is making progress on its backlog of unprocessed tax returns, because it’s requested by the American Institute of CPAs to increase its just lately introduced penalty aid by way of the top of the 12 months.
The IRS reported Monday it has decreased the variety of unprocessed particular person returns obtained this 12 months 2022 to eight.7 million, as of Aug. 19, and it is now opening mail inside regular timeframes. As well as, it has caught up on the backlog of tens of millions of unprocessed paper tax returns from final 12 months and mentioned all paper and digital particular person returns obtained previous to January 2022 have been processed if the return had no errors or didn’t require additional evaluation.
Nationwide Taxpayer Advocate Erin Collins reported to Congress in June that as of the top of Could, the IRS had a backlog of 21.three million unprocessed paper tax returns, a rise of 1.three million over the identical time final 12 months, however the IRS mentioned on the time these figures have been outdated (see story).
The IRS headquarters in Washington.
Andrew Harrer/Bloomberg
In line with mid-August figures reported this week by the IRS, the 8.7 million unprocessed particular person returns obtained in calendar 12 months 2022 embrace each tax 12 months 2021 returns and late-filed tax 12 months 2020 and prior returns.
“Of those, 1.7 million returns require error correction or different particular dealing with, and seven million are paper returns ready to be reviewed and processed,” mentioned the company. “This work doesn’t usually require us to correspond with taxpayers however does require particular dealing with by an IRS worker so, in these cases, it’s taking the IRS greater than 21 days to challenge any associated refund and in some circumstances this work may take greater than 120 days.”
The IRS’S long-standing purpose has been to ship tax refunds inside 21 days, however the pandemic and staffing shortages have compelled the company to delay many tax refunds. One other drawback has been amended tax returns, partly a results of the various adjustments in tax legal guidelines and laws lately because the IRS and Congress granted varied types of tax aid because of the CARES Act, the American Rescue Plan and different laws. As of Aug. 20, 2022, the IRS reported it had 1.9 million unprocessed Types 1040-X with amended tax returns. “We’re processing these returns within the order obtained and are working arduous to get by way of the stock,” mentioned the IRS. “The present timeframe might be greater than 20 weeks as an alternative of as much as 16.”
Most just lately, the IRS granted tax penalty aid to taxpayers who have been affected by the pandemic and had hassle submitting their tax returns in 2020 and 2021. Final week, the IRS introduced it is offering penalty aid to most particular person and enterprise taxpayers who filed their 2019 or 2020 returns late as a result of pandemic, whereas refunding $1.2 billion in penalties to almost 1.6 million taxpayers who filed late (see story). The aid applies to types in each the Type 1040 and 1120 sequence, in addition to others listed in Discover 2022-36. To qualify for the aid, any eligible earnings tax return needs to be filed on or earlier than Sept. 30, 2022. The aid is meant to be computerized, and the IRS mentioned it might robotically ship out the refunds by the top of September to eligible taxpayers. The IRS can be providing penalty aid to banks, employers and different companies required to file varied info returns, corresponding to these within the 1099 sequence. To qualify for aid, eligible 2019 returns should have been filed by Aug. 1, 2020, and eligible 2020 returns should have been filed by Aug. 1, 2021.
Nevertheless, these dates come at an inconvenient time of 12 months for a lot of taxpayers and preparers, the AICPA famous in a letter Thursday to the IRS and the Treasury Division. Whereas it applauded the unprecedented waiver of the failure to file penalty and likewise praised the IRS for waiving the assorted worldwide info reporting penalties, the AICPA pointed to the upcoming deadlines and enterprise cycle of the tax occupation and requested for the deadline of Sept. 30, 2022, offered within the discover be prolonged to Dec. 31, 2022. Setting a Sept. 30 deadline throughout a time when tax professionals are working to fulfill the Sept. 15 deadline for pass-throughs, Sept. 30 for trusts and Oct. 15 for people and firms could be unreasonable and would create an “insurmountable burden for many practitioners and taxpayers,” based on the AICPA.
The Institute additionally famous the complicated details referring to worldwide info reporting penalties and that many affected taxpayers could stay overseas, and contended the Sept. 30 deadline is unrealistic and would not immediate a essential mass of affected taxpayers to avail themselves of the aid referring to worldwide info reporting.
“Extending the deadline will help the practitioner group in maximizing the aid offered and produce extra taxpayers into voluntary compliance. In flip, such voluntary compliance will save the IRS sources,” mentioned the letter.
The AICPA has been urging the IRS in a number of letters since July 2020 to offer penalty aid to taxpayers who’ve skilled unprecedented challenges as a result of pandemic and added that it is happy the IRS has listened and offered some late submitting aid. But it surely’s now urging the IRS to go additional and lengthen the discover’s penalty aid till Dec. 31, 2022.