Last year was “the most difficult year taxpayers and tax professionals have ever known,” the Taxpayer Advocate said in his latest annual report to Congress on Wednesday as the IRS prepares for the start of the season of income tax returns on January 24. the agency is in crisis.
“There is no way to water down the year 2021 in the tax administration: From the perspective of tens of millions of taxpayers, it was horrible,” wrote national taxpayer lawyer Erin M. Collins. .
Some of these challenges for taxpayers and professionals: long processing and reimbursement times, difficulty reaching the IRS by phone, correspondence not processed for “many months”, limited and no information available on “Where is my reimbursement?” tool for delayed returns and more, according to the report.
the IRS faces enormous challenges as the new tax season approaches, including the backlog. The IRS began 2021 with more than 11.7 million returns as of 2020. It wasn’t until June for the agency to process all of the 2019 returns, according to the report. As the new tax season approaches, the backlog continues. As of mid-December, the IRS still had millions of items to process, including over 6 million unprocessed individual returns, 2.8 million unprocessed business returns, a combined total of over 2.8 million unprocessed amended individual and business returns and approximately 4.75 million pieces of correspondence.
“The IRS is in crisis and must allocate resources to its main mission – to process these returns and pay the corresponding reimbursements,” the report said. Adding to the complexity as the new tax filing season approaches, taxpayers who received advanced monthly child tax credit payments and stimulus checks last year will also have to reconcile them, so that processing and reimbursement delays over the past year could be “just as bad and potentially worse.” , in 2022 “, the report said.
At the same time, call volume has “skyrocketed” to historic levels during the pandemic. The IRS received about 282 million calls in fiscal 2021, of which only about 32 million were answered – 11%, or 1 in 9 callers. Among those who were successful, the average wait time was than 23 minutes, but taxpayers and preparers reported much longer wait times, according to the report.
Taxpayers have also flocked to IRS.gov, which received nearly 2 billion visits in 2021, up from around 650 million in 2019. Over 632 million people have used the “Where’s My Refund” tool, over 260 million over the previous year. While the IRS has encouraged taxpayers to rely on the “Where’s my refund?” A tool to know when to expect their reimbursement, the program had “significant limits” making it non-functional for tens of millions of taxpayers experiencing delays, wrote the taxpayer advocate, noting that he does not explain status of delays, reasons for delays or where refunds are being made.
The report points out that the IRS’s problems are not only due to the pandemic, but also the direct result of a reduced budget over the past decade which has led to under-staffing. Over the past decade, the IRS budget has been cut by almost 20%, including the adjustment for inflation. At the same time, the IRS lost more than 33,000 full-time employees between 2010 and 2020, including 13,000 law enforcement officers.
Collins’ main recommendation to Congress is to provide the IRS with more money to meet the needs of taxpayers and to conduct oversight to ensure that the funding is well spent.
As part of its own 2022 budget proposal, the Biden administration is calling for an increase in IRS funding of nearly 15%. The Build Back Better law passed in the House also includes additional funding of $ 80 billion over 10 years, but the bill remains stuck in the Senate. The taxpayer advocate warned that the new money would also not immediately solve the problems as the agency would have to recruit, hire and train employees.
While the watchdog gave a dazzling report on the situation, Collins wrote that despite the challenges, the IRS performed well under the circumstances, noting that the gap between workload and resources never was also great.
The number of taxpayers serving the agency has increased 19% since 2010. During the pandemic, Congress relied on the IRS to send billions of dollars, including three rounds of stimulus payments and payments advance monthly child tax credit; and exempted certain unemployment benefits during filing season. The IRS was able to process most of the electronically filed returns in a timely manner, issued 130 million refunds totaling $ 365 billion, distributed 478 million stimulus payments totaling $ 812 billion, and sent $ 93 billion child tax credit advance payments to 36 million families.