The IRS Faces Backlogs From Last Year As A New Tax Filing Season Begins
This Monday marks the beginning of tax filing season, when the IRS will begin accepting 2021 income tax returns from individuals and businesses. Most people have until April 18 to submit them this year.
As it starts to accept this year's returns, the IRS is still working through millions filed last year. And that's just one of its problems.
"The service is in the roughest shape it's been in in 50 years," says Mark Everson, who served as IRS commissioner in the George W. Bush administration.
He says the agency is understaffed, has more work than it can handle and is underfunded.
The result, he says, is the IRS has "huge backlogs right now that are unprocessed returns from prior years, refund requests, a lot of correspondence that hasn't even been opened and ... it's very tough to get through on the phone. So that's a bad cocktail."
The IRS has its own internal watchdog, the National Taxpayer Advocate. In her annual report to Congress this month, the advocate, Erin Collins, said that in 2021, the agency had a backlog of some 35 million returns that required manual processing. Taxpayers who called the IRS for guidance had only a 1 in 9 chance of getting their calls answered.
"Among the lucky one-in-nine callers who was able to reach a [customer service representative], the IRS reported that hold times averaged 23 minutes," according to the report, while also noting that practitioners and taxpayers have reported that hold times were often much longer.
She told NPR that taxpayers are annoyed.
"It has been a very painful period of time, very frustrating, very hard for taxpayers," Collins said. "They can't get through to the IRS through phones, their paper correspondence have been piling up, so it's very difficult for them to figure out what going on."
The IRS' computers are the oldest major tech systems in the federal government
Collins says the IRS' budget has declined by about 20% in the past 10 years while the number of tax returns filed has gone up 13%. The agencies' computers are the oldest major tech systems in the federal government.
At the same time, the IRS' workload has increased. In the last two years, it has had to distribute three rounds of COVID-19 assistance payments to eligible Americans as well as the expanded child tax credit.
"That is far more than just processing returns. It's also having to make sure that those refunds and those amounts go to the right bank accounts, and that people are properly filing their returns so that they can access those benefits in what is a time of economic emergency," says Caroline Bruckner, managing director of the Kogod Tax Policy Center at American University.
And while Congress did provide extra money for the IRS to process those payments, Bruckner says the "one-off extra funding amounts aren't nearly enough to cover the long-standing funding issues that the IRS has, and to deal with the personnel loss that they have accumulated over the last 10 years."
The White House agrees. On Friday, press secretary Jen Psaki called on lawmakers to boost funding for the service. The Biden administration's Build Back Better Act would provide additional funding of $80 billion for the agency over 10 years. But that package's future is in doubt, and lawmakers have yet to agree to a funding bill for the agency for the current fiscal year.
Everson suggests IRS workers should go back to the office
Former Commissioner Everson, who's now vice chairman of the tax consulting firm alliantgroup, supports more funding for the IRS, but says that's a long-term issue. In the meantime, one thing the agency should do now, he says, is call IRS employees who have been working from home because of COVID-19 back to the office.
"They should all hands to the pump at this time," he says. "They need to get everybody back in the office as soon as possible, so you just have more bodies working on these issues."
Collins' report offers suggestions to address taxpayer problems, including a adding a "customer callback" feature so taxpayers don't have to wait on hold and creating a filing season dashboard on IRS.gov that describes how long it is taking to process paper returns and the percentage of taxpayers who have called the IRS and gotten through.
So how should taxpayers deal with such a beleaguered agency? The IRS says make sure all your documents are together when you start out working on your return and to file electronically.
There's also help: Taxpayers who earn less than $58,000 a year can get free help filing from the Volunteer Income Tax Assistance. That program, along with another called Tax Counseling for the Elderly, offers assistance from IRS-certified volunteers.