A group of 99 House Republicans has sent a letter to Internal Revenue Service Commissioner Charles Rettig asking for information about how the IRS plans to fix the backlog of unprocessed tax returns before the 2022 filing season, which begins on January 24, 2022.
In an early December letter, the members pointed out the Treasury Inspector General for Tax Administration recently reported that more than 9.6 million unprocessed paper returns received in 2021, plus another 5 million paper and e-file returns, have been suspended during processing.
The backlog escalated with closed IRS offices during the early days of the pandemic
The IRS has been trying to catch up with the backlog of paper returns that began building up in storage trailers outside its facilities last year in the early days of the pandemic when IRS offices were closed to most employees. While many of the employees returned to their offices last year to deal with the delayed tax season and have managed to at least open much of the unopened mail, new correspondence arrives every day, and getting all the old tax returns fully processed remains a work in progress.
A vicious backlog cycle could harm millions of taxpayers
“This massive backlog is causing significant and unnecessary burdens for families and small businesses who can’t get answers from the IRS about why their returns have not been processed,” they wrote. “The IRS is in danger of falling into a vicious backlog cycle that will harm millions of taxpayers.”
The impact of the IRS backlog of unprocessed tax returns on the 2022 tax season is causing great concern
They are especially worried about the impact on the 2022 filing season and the IRS’s readiness to deal with it. “As the Internal Revenue Service (IRS) prepares for the 2022 tax filing season, we write with great concern regarding the backlog of unprocessed returns from the current 2021 and 2020 filing seasons. Our concern is underscored by the frequent outreach we are receiving from our constituents about the processing delays and inadequate taxpayer assistance associated with the backlog. Moreover, the Taxpayer Advocate Service’s (TAS) recent decision to no longer accept any cases regarding amended returns will only exacerbate this problem.”
National Taxpayer Advocate Erin Collins recently wrote about her reluctance to deal with cases involving delays in amended tax returns when there are no other issues.
More funding was requested but held up in the stalled Build Back Better Act
The Biden administration has requested more funding for the IRS, but many of the same GOP lawmakers who are complaining about the backlog have also been resisting the extra funding, especially if the money goes toward increased enforcement and audits of taxpayers, which would bring in revenue for the administration’s Build Back Better Act, which so far has attracted support only from Democrats and did not pass the Senate in recent voting. Senator Joe Manchin, the Democrat holdout who put the brakes on the bill, said (in early January 2022) he’s not in talks with the White House or top Democrats on reviving President Joe Biden’s $2 trillion tax and social spending agenda, leaving the administration’s signature domestic initiative stalled.
“Despite a voluntary compliance rate of over 80% in the United States, the Biden administration has focused its advocacy efforts on securing mandatory funding for tens of thousands of additional IRS auditors and for provisions that would require financial institutions to transmit their customers’ private, sensitive data to the IRS,” the lawmakers wrote. “Given the feedback we are receiving from our constituents, it’s clear that too little attention is focused on the first aspect of the IRS’s stated mission: to ‘provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities.’”
The National Treasury Employees Union, which represents IRS employees, is supporting the increase in IRS funding in the Build Back Better Act and pointing out how necessary it is.
IRS funding in the Build Back Better Act was putting the focus on customer service
“The Build Back Better’s focus on customer service will revolutionize the relationship between taxpayers and the IRS,” NTEU national president Tony Reardon said in a December statement. “Having more tax professionals on hand with faster and better ways to communicate is essential to giving Americans the assurance that their tax return is handled accurately and fairly.”
The Build Back Better Act would add $79 billion over the next decade for IRS taxpayer services, business systems modernization, operations support, and enforcement activities. It also promises to help with staffing the phones. On some high-volume days, calls to the IRS can average 1,500 calls per second, the NTEU noted. Between January and August of this year, the agency received more than 199 million calls, according to Rettig, a 400% increase over the average year. According to the IRS Data Book, the number of customer service representatives employed at the end of the 2010 fiscal year was 21,057. At the same time in 2020, it was 12,422. Overall funding for the IRS has fallen more than 22% on an inflation-adjusted basis from 2010-20 and resulted in the loss of 15,000 employees.
Efforts were made in 2019 to improve IRS technology and staffing
The Taxpayer First Act of 2019 included some funding the IRS to improve its technology and staffing, but the Build Back Better Act would offer more money to the IRS to help it deal with its customer service challenges, restoring staffing levels at Taxpayer Assistance Centers around the U.S, where taxpayers can make an appointment and meet with an IRS employee face-to-face. The money for technology modernization would also improve customer service with more options for digital communications, secure document exchange, expanded payment options, digital signature authorizations, and automated callback programs. The National Taxpayer Advocate has reported that the IRS’s 60 different case management systems have become obsolete and limit taxpayers’ ability to get the full details about their cases.
Passage of the Build Back Better Act is still uncertain right now but will perhaps be revived in this first quarter. Meanwhile, the GOP lawmakers are worried about how this upcoming tax season will go.
“On Dec. 1, 2021, the IRS launched its ‘Get Ready for Taxes’ campaign for the 2022 tax season,” they wrote. “While we appreciate the IRS’s outreach to encourage taxpayer preparedness, we have serious doubts about the IRS’s own preparedness for the new season.”
Lots of questions and still too few answers about the IRS backlog
This frustrating backlog situation is bound to raise a lot of questions and issues regardless of how the Build Back Better Act shakes out. While I can't tell you anything about when a past return might be processed if you have questions relating to how you or your business are impacted by this holdup – or anything else – don't hesitate to reach out to me or any of my Tax Problem Solver Team, and we can help you with whatever's going on.
Contact me by one of the methods below in the blue box, or email me at Larry@TaxProblemSolver.com and we can dive into your specific tax matters and solve them. You can also click here to book a free consultation.
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