2021 was often cited as the most challenging year for taxpayers and tax professionals and with the even bigger backlog facing the IRS, 2022 is proving to be even more difficult.
The National Taxpayer Advocate or NTA, an independent watchdog within the agency was created by Congress to ensure taxpayers are treated fairly and to help them resolve matters not addressed through the normal IRS procedures as well as to address systemic issues within the IRS. In a recent NTA report submitted to Congress, three critical areas of taxpayer service were identified: processing of paper returns, longer wait times on the telephone and responding to taxpayer correspondence. Prior to the COVID 19 pandemic, paper filers could expect a refund within four to six weeks after filing; however, according to the NTA, a refund this year can take anywhere from six months to one year with ten months being more common. These delays are creating “unprecedented financial difficulties “for millions of low-income taxpayers who rely on their refund.
The NTA found that while the IRS was on track to eliminate its 2021 backlog by late June, the agency has an even bigger backlog of paper returns this year. At the end of May 2022, the agency had yet to process over 21 million paper tax returns – up from 1.3 million or 7% from last year. The largest backlog was for individual 1040s at 8.2 million returns and 2.3 million amended individual 1040s. The agency also has yet to process 7.4 million business returns, up from 6.1 million last year. As if this news is not bad enough, the report indicates that there are at least 3.4 million returns that have yet to be classified.
The IRS has been successful over the last few years to move more taxpayers to file electronically – last year, 90% of individual taxpayers e-filed. However, there are still about 17 million taxpayers who file paper returns. For paper returns, the report reveals that the digits on every paper return are entered manually into IRS systems by an employee as the IRS has not yet implemented a barcoding or scanning technology to automate this process. In addition to urging the agency to implement modern technology to address this draconian and inefficient process, they also recommend that the agency remove barriers to paper filing.
The report also notes major problems with the IRS handling of telephone calls and correspondence from taxpayers. In responding to taxpayer telephone calls, the report found that only one in ten calls actually reach an IRS employee and that wait times have gone up to 29 minutes from 20 minutes. On handling taxpayer correspondence, the report found that as of May 2022, the agency took an average of 251 days, more than eight months, to respond to errors and taxpayer correspondence. In comparison, the agency averaged 74 days in 2019.
We wish we could say our experience has been different, but unfortunately nothing in this report, particularly with regard to delayed phone and correspondence response times, is a surprise.
