IRS to start tax season with a large backlog

The Internal Revenue Service will kick off the approaching tax season with a backlog of at least 10 million unprocessed returns from las...

The Internal Revenue Service will kick off the approaching tax season with a backlog of at least 10 million unprocessed returns from last year, according to a new report from the National Taxpayer Advocate.

The remaining stack of statements comes from “the most difficult year taxpayers and tax practitioners have ever seen,” lawyer Erin M. Collins wrote in its annual report.

While the backlog isn’t too different from last season, it is a far higher number than the untreated returns the IRS typically faced before the pandemic.

One of the main reasons for the stack, according to the report, is that the federal government tasked the IRS with administering various stimulus payments and other programs during the pandemic. This meant that the agency, which has seen its budget and staff shrink in recent years, had to reallocate a lot of resources to carry out these financial assistance programs.

These factors led to a “horrible” filing season in 2021 from a taxpayer’s perspective, Collins wrote in her report, which was sent to Congress on Wednesday. Last year, the vast majority of taxpayers – 77% – received refunds on their 2020 tax returns, but tens of millions of them experienced delays.

“Paper is the kryptonite of the IRS, and the agency is still buried there,” Ms. Collins said in a statement, referring to the millions of paper returns that make up most of the backlog. The Office of the Taxpayer Advocate, headed by Ms. Collins, is an independent entity within the IRS that focuses on issues of taxpayer rights and services.

The tax department itself warned taxpayers this week that staffing shortages and backlogs would result in another frustrating filing season, which begins Jan. 24 and ends April 18 (in most states).

At a Monday briefing, Treasury Department officials pointed to the IRS’ lack of resources and said a lower level of service is to be expected – including the time it will take for staff to answer taxpayer phone calls with questions. Treasury officials noted that in the first half of 2021, fewer than 15,000 employees were available to handle more than 240 million calls, or one person for 16,000 calls.

Officials blamed Republican lawmakers, who blocked efforts to increase funding for the agency, for budget constraints.

Biden administration is looking for an additional position 80 billion dollars over a decade for the IRS to increase staff, improve technology, and improve enforcement and customer service capacity. This request is part of the administration’s Build Back Better Act, which is blocked in Congress.

“Additional resources are essential to help our employees do more in 2022 – and beyond,” IRS commissioner Charles P. Rettig said Monday in a statement.

Ms Collins reiterated the agency’s recommendation that Congress provide her with enough money to do her job. Since 2010, the IRS’s workforce has fallen 17 percent, according to the report. Its caseload, measured by the number of individual returns, increased from 142 million in 2010 to 169 million last year, an increase of 19%.

Over the past two years, the agency has been tasked with administering several pandemic-related programs, including three rounds of stimulus (totaling 478 million payments worth $812 billion) and $93 billion. dollars in advance payments for the expanded child tax credit to over 36 million families.

“An irony of the past year is that, despite its challenges, the IRS has performed well under the circumstances,” Ms. Collins wrote.

By the end of December, the IRS had yet to complete processing of six million original tax returns, 2.3 million amended returns, more than two million quarterly employer returns and five million taxpayer correspondences – with some submissions from April and with many taxpayers still pending. for refunds, according to the attorney’s report. In contrast, there are less than a million unaddressed returns in a more typical year, according to Treasury officials.

Even millions of returns filed electronically — which typically move through the system faster — were held on hold during processing due to discrepancies between the amounts claimed in the returns and what the IRS had on file.

The problem most frequently arose with the clawback refund credit, which taxpayers have claimed when they have not received all or part of their economic incentive payments from the previous year. These statements had to be manually reviewed by the agency, resulting in over 11 million math error notices. When the taxpayer disagreed with the error and submitted a response, the report said, it entered the IRS ‘paper processing backlog, further delaying the refund.

Ms Collins wrote that those discrepancies were likely to reappear this tax season – this time for the third round of stimulus payments, issued in March, and the new Advanced Child Tax Credits – leading to later returns. The IRS tries to avoid these problems by sending notices to taxpayers who have received the stimulus and credit payments, indicating how much they have received.

Alan Report contributed reports.

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Newsrust - US Top News: IRS to start tax season with a large backlog
IRS to start tax season with a large backlog
Newsrust - US Top News
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