That is both a literal and figurative statement. The photo above, provided by the U.S. Department of the Treasury, shows the cafeteria at the IRS’ Austin facility in June. This is visual confirmation of what many of us are already aware of: the IRS is behind and struggling to catch up. That was the message of National Taxpayer Advocate, Erin M. Collins, when she issued her mid-year report to Congress last month.
- The National Taxpayer Advocate leads the Taxpayer Advocate Service, an independent organization within the IRS which is tasked with helping taxpayers with individual tax problems as well as recommending improvements within the IRS and in the tax law.
In her report, Ms. Collins provided additional confirmation regarding the IRS’ struggles in the form of the following statistics:
As of the end of May 2022, the IRS had a backlog of 21.3 million unprocessed paper tax returns, up from 20 million at the end of May 2021
- Over the past year, paper filers have generally waited more than six months (sometimes much more) to receive refunds. Prior to the Covid pandemic, the IRS typically issued these refunds within four to six weeks of filing.
- During the 2022 filing season, the IRS answered only 10% of the calls it received from taxpayers. This percentage was essentially unchanged from 2021, despite receiving fewer than half the number of calls.
How did we get here?
Things are looking bad for the IRS right now – but how did it get this way? The first and most obvious answer is the pandemic. When IRS facilities – like most workplaces around the world – shut down in the early months of the pandemic (coincidentally also the middle of tax season 2020), paper returns and other non-electronic work backed up while employees were unable to process them. This backlog was compounded when the IRS was tasked with additional duties during the pandemic, such as issuing stimulus payments and developing rules and processes related to the tax impacts of items such as the Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC).
This increased work load occurred at a time when the IRS’ budget and workforce were being reduced. According to the Tax Policy Center, the IRS’ budget fell by 21% in real terms between fiscal years 2010 and 2020. IRS figures show that during this same time, the number of full-time equivalent employees also fell by 21%. So the IRS was asked to do all of the above with less money and people than they had in each year in the decade prior to the pandemic, all while being unable to physically access much of the work.
What is the IRS doing about this?
As you can imagine, the IRS is limited in what it can do immediately, but there are a few things working in its – and by extension, we the taxpayers’ – favor. First, the extra workload brought on by the series of relief bills that were passed at the height of the pandemic – the CARES Act, the American Rescue Plan, and others – has either plateaued or gone away. For example, the IRS is still dealing with amended payroll returns related to the ERC, but no longer has to issue any stimulus checks. Second, the IRS received increased funding for fiscal years 2021 and 2022, which allowed them to increase their workforce starting in 2021.
Furthermore, Erin M. Collins, the Nation Taxpayer Advocate, included in her report, several recommendations on how the IRS can improve. These recommendations include adding 2-D barcodes to paper-filed tax returns to reduce the amount of manual data entry required, increasing the number of forms that can be e-filed, improving telephone service, and improving hiring and training processes.
Unfortunately, hiring new people, training employees, implementing new technology and improving systems all take time. This probably explains why things seem to be getting worse despite the increased funding. Still, there is hope.
What can taxpayers do?
Admittedly, taxpayers have limited options when it comes to achieving quicker results. However, there are a few strategies that can help minimize the pain.
- Use electronic forms of communication with the IRS whenever possible. Primarily, this means electronically filing (e-filing) tax returns rather than paper filing. The IRS is processing electronically filed returns much faster and more accurately than paper filed returns.
- Monitor your IRS accounts. Creating and monitoring an IRS online account is a good way to track progress of your filings, and potentially even catch errors before they cause too much harm.
- Monitor the status of IRS correspondence. Sometimes, the only way to communicate something to the IRS is in writing. Always send written correspondence using a method that allows you to confirm it was received (for example USPS return receipt). Furthermore, if you haven’t heard back from the IRS within eight to ten weeks of your communication, follow up with a phone call.
- Be patient but persistent. Often the issue is simply that the IRS hasn’t opened or processed your return or communication yet. Be patient as they work through their backlog, but be sure to monitor and follow-up as necessary.
Dealing with the IRS has never been something to look forward to, but during the last two years it has become a task to test the sanity of even the most patient taxpayers. If you find your sanity being tested, reach out to your HM&M tax advisor for help.
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