The IRS is still dealing with an enormous backlog left over from Covid shutdowns. This is causing long phone hold times for taxpayers who call the IRS with questions, as well as tax preparers who call the IRS on behalf of their clients.
The IRS in Crisis
The IRS continues to face a huge challenge amid the 2021 tax season.Due to the pandemic which has spanned over the past two years, they still have a staggering backlog of unprocessed tax returns from 2020, and 2021 tax returns are now pouring in.
Here are some statistics that demonstrate how backlogged the IRS is:
- It took until June 2021 for the agency to process all 2019 returns.
- 2021 began with more than 11.7 million returns to process from 2020.
As of mid-December 2021, the IRS still had millions of items to address
- More than 6 million unprocessed individual returns
- 2.8 million unprocessed business returns
- Approximately 4.75 million pieces of correspondence.
The bottom line is that the IRS is at maximum capacity and will continue to be so for a very long time. Taxpayers need to take this into consideration when filing 2021 tax returns and are expecting a refund.
If you are lucky enough to have a simple tax return that you can file online using Turbo Tax, H&R Block, or any number of tax filing platforms, and can accept an electronic payment to your bank you will likely receive your tax refund faster. If you have a complicated tax return, are doing a paper tax return, or need a check for your refund, this will take much longer to process.
“The IRS is in crisis and needs to apply resources to its core mission – processing these backlogged returns and paying the corresponding refunds from 2020,” the Treasury stated.
They are projecting that 2022 processing times for 2021 tax returns could be “as bad”, and potentially worse in 2022. Taxpayers who received advanced monthly child tax credit payments and stimulus checks for 2021 will also need to be reconciled which will add to the complexity and increase processing times of tax returns.
Growing Frustration of Taxpayers
The IRS has been bombarded with an estimated 282 million calls in the 2021 fiscal year as frustrated taxpayers waiting for their tax refunds call customer service to get answers.
With decreased staff numbers and challenging work circumstances due to the pandemic, only about 32 million calls were answered. That’s just 11%, or 1 in 9 callers who got through and then experienced hold times for as long as 45 minutes before being able to talk to an IRS representative who, in turn, was unable to provide concrete answers about status in most cases.
This has left many taxpayers in the lurch wondering what’s happening with their 2020 returns.
Taxpayers were forced to rely on the IRS.gov “Where’s My Refund?” tool in search of answers. However, the tool had “significant limitations” making it non-functional for tens of millions of taxpayers experiencing delays as it does not explain the status of delays, reasons for delays, or where the refunds are in processing.
Most of the nearly 632 million users of “Where’s My Refund?” in 2021 (up from roughly 260 million in 2020) were still left without answers, proving that both the IRS and taxpayers were both in equally difficult and frustrating positions.
During this pandemic period where so many individuals lost their jobs, their income, their unemployment benefits, and their pandemic emergency support benefits, many were (and are) relying on their tax return to survive during these uncertain times. Being in the dark about tax refunds has only added to the difficulty of their financial situation.
What most Americans do not realize is that the issues the IRS is experiencing have been in the works for a very long time. The unexpected crisis situation that the pandemic brought just highlighted the existing internal problems of the IRS as an institution.
The January 2022 Treasury report explains that the diminished budget over the past decade has led to inadequate staffing. Over the past decade, the IRS’s budget has been slashed by nearly 20% including the adjustment for inflation. At the same time, the IRS has lost more than 33,000 full-time employees between 2010 and 2020, including 13,400 enforcement personnel.
The Solution to an Overwhelming IRS Need
The Treasury’s primary recommendation to Congress is to quickly provide the IRS with more money to empower the IRS to meet its taxpayers’ needs and conduct oversight to ensure the funding is well spent.
As part of its own 2022 budget proposal, the Biden administration is calling for an increase in IRS funding of nearly 15%. The Build Back Better Act passed in the House also includes an additional $80 billion in funding over 10 years, but the bill remains stalled in the Senate.
Unfortunately, even when the new bill is finally approved (which could take a long time) the new money would not provide immediate relief to the current IRS backlog and lack of staffing. The agency would still need to recruit, hire, and train employees which will take time.
Considering all the challenges that the IRS is facing today and for the past two years, the IRS has performed remarkably well under the circumstances considering that the gap between the workload and resources has never been greater. Under these circumstances, they have done what they could.
IRS Agents Delivered Under Challenging Situations
Congress threw the IRS a huge curveball during the pandemic for which they were not prepared for but still stepped up and delivered.
The IRS managed to process 130 million refunds totaling $365 billion in a “timely” manner.
They also sent out billions of dollars including:
· Three rounds (478 million) of stimulus payments totaling $812 billion
· $93 billion in advanced child tax credit payments to 36 million families
· And exempted some unemployment benefits on tax returns
These tasks were all above and beyond their standard operations with no systems in place and no prior training on the process. This all happened on the spot and while maybe it wasn’t completed perfectly it did, in fact, help many Americans get through a very difficult and unimaginable financial crisis.
If you are among the many millions of people who received a pandemic emergency relief payment of some sort, we owe a debt of gratitude to the IRS agents who worked tirelessly to make this happen.
The system is still lagging but it is working. We all need to exercise patience right now. Please remember to be nice to your tax preparers and IRS agents, as they are doing the best they can with the resources they have. At BNC Tax, our tax preparers are often spending hours on hold with the IRS on behalf of our clients.
BNC Tax specializes in U.S. tax preparation for Americans living abroad. We know how to navigate the complex issues that homeowners and business owners face when living abroad. Schedule a consultation with us today by making an appointment on our Appointment Calendar.