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IRS Backlogs – More of the Same Expected?

The National Taxpayer Advocate (NTA) provided an update on November 10, 2022 on the Internal Revenue Service’s return processing backlog. Unfortunately, it appears that the IRS is in a similar position this fall as they were during fall of 2021.

As of October 21, 2022, there was a backlog of just under 8 million individual and business returns for filing season 2022 that had been paper filed, but not yet processed. Many of these taxpayers are waiting on refunds to be issued. In the prior year, there were approximately 7 million returns waiting to be processed. However, there are currently more returns in suspension for special processing – so the NTA noted that it is essentially the same numerically year-over-year. Additional resources have been deployed by the IRS to process the backlog and they are attempting to be “healthy” by the end of the year, but no definition has been provided for what a healthy backlog looks like.  

In addition to the ~8 million Individual and business return backlog, there are approximately 2 million amended returns that are waiting to be processed. The IRS has stated that it is expected to take over 20 weeks to process amendments but did not provide a maximum amount of processing time. Many taxpayers have been waiting well over 20 weeks for their refunds resulting from amendments.

As of October 10, 2022, there had been 14 million notices issued for filing season 2022. Generally, the only way a taxpayer can respond to a notice is via paper or a phone call. There are currently approximately 4.5 million pieces of paper correspondence received by the IRS still awaiting processing. Currently, only 10% of phone calls received by the IRS are answered – making it a whopping 90% of phone calls going unanswered! The IRS is seeking to increase the percentage of phone calls answered up to 85% for filing season 2023. The problem is, the IRS will need to redirect its agents who are processing correspondence and amendments – further worsening the problem.

Earlier this year, the NTA issued a Taxpayer Advocate Directive (TAD) encouraging the IRS to accelerate the development and implementation of its scanning technology in an attempt to speed up return processing. The TAD encouraged the IRS to 1) work with software companies to develop a plan for them to voluntarily put 2-D barcodes on their forms, and 2) to develop a plan to implement optical character recognition to automate the processing of handwritten returns. The IRS was directed to put these in place for filing season 2023 if possible, or 2024 at the latest. Time will tell if the IRS is able to meet these timelines, but until then, we should continue to expect long processing times and a continued struggle to speak with an IRS agent.

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