It’s only now that you’re experiencing the winter blues, but wait until you hear about the IRS.
The IRS is feverishly scrambling to clear a large backlog of old material at the same time that Americans are filing their 2021 tax forms, which are difficult for the agency to process due to controversial policies like stimulus cheques and advance child tax credit payments.
More than 26 million tax returns for 2021 have already been submitted, with roughly 9 million of them receiving refunds, according to Friday’s latest filing season figures.
A statement from the IRS claimed, “The IRS is off to a solid start this year’s tax season.
This year’s tax season is the third since the COVID-19 issue, and the IRS appears to be starting to exhibit signs of strain.
The IRS was only able to answer 11% of the 282 million customer service calls it received in 2021, according to a report released in January by the Taxpayer Advocate Service. As of this writing, many Americans have yet to get their tax refunds for 2020.
This is not good news for the year 2022.
Howard Gleckman, a senior scholar at the Urban Institute, writes to Money, “I anticipate the troubles this year will further add to people’s discontent.”
“Their inability to have queries addressed by phone or on the website, difficulties in setting up an online account and uncertainty over subjects like as the child tax credit will weaken the agency’s reputation even more. They will get even more irate if they have to wait a long period for their returns.”
TAX SEASON PROBLEMS WITH THE IRS
Signs that this year’s tax filing season could be particularly challenging include the following:
To put it another way, 2021’s backlog may be larger than originally anticipated
According to a recent article in the Washington Post, the IRS has nearly 24 million 2020 tax returns in a backlog that must be manually processed before work can proceed.
According to the Taxpayer Advocate Service report, the Internal Revenue Service ended the year processing at least 9.8 million individual tax returns.
While the discrepancy may vary depending on how you measure it, everyone agrees that the backlog is a serious issue
THE IRS HAS BEGUN PUBLICLY BLAMING ITS COMPUTERS
The IRS published an explanation of the problem on its website on January 27 and linked the backlog to the agency’s “outdated technical ecosystem” and insufficient funds.
We will do our best to help taxpayers, but we must work within the constraints of an outdated system, where even a seemingly simple modification could jeopardize the overall operating system critical to this tax season—and the more than 160 million returns we expect to receive,” reads a letter from the IRS.
IT DOESN’T APPEAR TO BE ABLE TO EMPLOY PEOPLE TO HELP
As a result of a lack of IRS staff, the backlog is so big. Erin Collins, the National Taxpayer Advocate, told a House Ways and Means panel on Feb. 8 that the IRS had a goal of hiring 5,000 additional employees, but only 200 positions had been filled.
Pay inequality may be a contributing factor. Collins said that “in current economy, it is not unexpected that the IRS is having difficulties locating enough eligible job applicants.” The starting compensation for many entry-level IRS employees is $24,749.
LAWMAKERS ARE CONSIDERING PAUSING AUDITS.
Republican Rep. Tom Rice cited to an opinion by Nina Olson of the Center for Taxpayer Rights that advocated a four-month pause in audits until the IRS gets back on its feet, which Rice referred to during a congressional hearing.
A delay in auditing, according to Olson, would “open up resources for the deployment of customer support activities and lessen the calls and letters that must be processed during the filing season.” Olson
Rice suggested that these and other ideas be given serious attention.
As a former tax lawyer and CPA, I’m a little wary of suspending all audits, which may have a significant impact on the agency, he said. Nevertheless, I believe that drastic measures like these should be considered in order to address this issue. That’s how bad things are right now.
CURRENT IRS EMPLOYEES ARE BEING TRANSFERRED AROUND
For the sake of speeding up the backlog, Politico reported that 1,200 IRS employees had been temporarily relocated.
Chuck Rettig, the IRS Commissioner, reportedly informed staffers in an email that he needed their previous experience because they “are in the best position to provide the much-needed skills and support to service the taxpayers represented in these inventories.”
“We’re leaving nothing off the table for consideration to improve overall service,” Rettig added in the statement. The IRS has instituted mandatory overtime and is “prepared to promptly react to changing circumstances when appropriate to do so,” he wrote in a letter to more than 500 members of Congress.
Collins has also proposed using third-party contractors and even automation to reduce the amount of physical labor.
CERTAIN NOTICES ARE NO LONGER SENT OUT BY THE IRS.
Taxpayers who have been credited for payments but have no record of a tax return are no longer being sent letters by the IRS, the agency stated in a January statement. “To avoid confusion for taxpayers and tax experts,” the Internal Revenue Service on Feb. 9 suspended more letters, such as CP80 (for unfiled tax returns) and CP501 (for unpaid sums).
However, it is stated that we are legally unable to block all notices. Because interest and penalties can build up, Collins believes the letters may be beneficial to taxpayers.
There is a sense of frustration even among accountants.
Tax preparers are expressing their frustration with the IRS’s current state of disarray. Taxpayers who have been pushed by the American Institute of CPAs to receive relief and halt automated compliance measures have been pleased by the IRS’s latest moves, which the institute described as a “positive step.”
In addition, the government was tasked with going much further.
The AICPA said: “We continue to urge the IRS to consider additional recommendations for relief by giving longer account holds, simpler reasonable cause relief, and wider payment safe harbors until the IRS can considerably and meaningfully reduce their processing backlog.
Accountants are increasingly feeling “powerless” to aid their clients, according to the chair of the AICPA tax executive committee, Jan F. Lewis.
To gain answers from the IRS, some are resorting to extreme measures. To save their clients the time and frustration of having to wait on hold, tax attorneys, accountants, and other tax preparers can use enQ’s service, which costs about $300 per month or $1,000 per year.
Ordinary customers aren’t as fortunate as they appear to be. When it comes to this year’s tax season, the best thing you can do is likely to file early and accurately, and if you’re getting a return, choose direct deposit.