The Internal Revenue Service (IRS) faces a large number of backlogs as the tax season approaches, according to the National Taxpayer Advocate’s Annual Report to Congress. It pertains to the 11.1 million returns from 2020 and 2019 that were left uncleared until June 2021, among others.
The report stated, “Yet 2021 was the most challenging year ever for taxpayers.” Generally, the backlogs were due to out-of-date technology and a lack of staff members.
Factors Affecting Tax Administration
The National Taxpayer Advocate found that lengthy processing of backlogs led to long refund delays. For instance, according to the IRS, it takes up to at least eight months to process paper returns. There were also 9.8 million individual returns in IRS’s Error Resolution System (ERS) as the filing season was closed, and each of these required manual processing.
Another lowlight in the tax administration in 2021 was the escalation of received calls due to the COVID-19 pandemic. It led to a low level of phone service as the callers could not consult their tax-related questions. In return, taxpayers relied on the IRS’ Where’s My Refund? Tool, but its program has limitations that could not answer the taxpayers’ inquiries.
Additionally, tens of millions of notices had to be sent. However, the refunds were further delayed due to the long process of taxpayer responses to its notices. Some cases led to premature collection notices.
Effect of IRS
Erin Collins, from the National Taxpayer Advocate, said that the IRS is encountering a crisis. He said that in 2021, over a prolonged time, taxpayers had to wait for their tax returns, refunds, and correspondence to be processed, issued, and addressed, respectively.
Collins added in the report that the IRS tended to attribute unique challenges brought by the COVID-19 pandemic. However, even before this global health crisis, IRS’s taxpayer services and technology were already inadequate.
As for the taxpayers, they can avoid delays in receiving their 2021 refunds. According to IRS Commissioner Chuck Rettig on January 17 (Monday), taxpayers are advised to avoid and file paper returns electronically. Doing so allows refund payments to be made by direct deposit.