Tax Return Backlogs? The IRS Has A Plan For That
The IRS plans to hire 10,000 workers to tackle the backlog of 24 million unprocessed tax returns, according to a plan first announced in January. The agency has been under unprecedented strain due to staffing limitations during Covid-19 and its role administering pandemic programs.
“Since the pandemic began, IRS employees have been called on to go above and beyond for the American people, and they have met the moment. But they’ve had to do so without adequate resources and funding, which is why the agency faces the challenges that it does today,” said Wally Adeyemo, deputy secretary of the Treasury, in a statement on March 10.
Despite the agency’s challenges, the IRS issues more than most tax refunds within 21 days of filing. But some returns, especially those on paper, can take several months, and have contributed to the growing backlog.
So how will the staffing changes affect your taxes in 2022 and beyond?
A Big Upside of More IRS Workers: Your Calls May Finally Be Answered
One potential benefit of a better-staffed IRS is that the beleaguered agency might start to answer more calls from desperate taxpayers and CPAs.
In 2021, the IRS received a record 282 million calls, but only 11% reached a representative, according to damning data from the Taxpayer Advocate Service, an independent organization within the IRS.
Danielle Santiago of New Orleans filed an amended paper tax return in Sept. 2020. But after filing, she couldn’t reach the IRS, though she made several attempts to find out what was taking her refund so long.
“I contacted the IRS repeatedly by phone…at least once or twice per week. However, I was unable to speak with anyone concerning the status of my tax return,” Santiago, 57, says. She also received conflicting mailed notices concerning the status of her return and even got an incorrect notice stating she owed the IRS money.
After several months, Santiago was able to reach an IRS representative by phone, but it took close to a year before she actually received her refund.
Another area where the IRS has been significantly lagging is processing paper tax returns and amended returns.
Alton Bell, II, founder of Bell Tax Accountants & Advisors in Chicago says he hopes the hiring spree will decrease the backlog and provide a better experience for his clients.
Prior to the pandemic, Bell says the IRS would typically process paper tax returns within two months. However, his firm now experiences up to ten months of delays for these returns.
Recently, processing times have decreased slightly, but Bell still warns his clients that paper returns can take at least six months to process.
With the new funding, the IRS expects to significantly reduce the backlog of tax returns by the end of 2022 and ensure that processing times are back to normal by the start of 2023.
How the IRS Can Afford The Hiring Spree
For fiscal year 2022, the IRS will receive $12.6 billion from Congress—an increase of $675 million from the previous year and the biggest jump since 2001.
According to the Center on Budget and Policy Priorities (CBPP), IRS funding has declined by 20% over the past decade (adjusted for inflation).
And while the U.S. population has grown by 60% since 1970, the IRS’ number of employees is largely unchanged since then, leaving it very short handed.
It’s going to take time for the IRS to hire, onboard and train these employees, so operational changes won’t be immediately evident. Bell says taxpayers should take proactive steps to deal with tax return delays and the IRS’ limited phone assistance.
Bell recommends that before calling the IRS, make sure to have prior and current tax returns and your Social Security number or Taxpayer Identification number handy.
“The IRS is big on verifying a person’s identity. If you don’t have the right documents, it can be deflating if you can’t get your account information after holding for a long period of time,” Bell says.
If you’re still unable to get results, Bell recommends consulting a tax professional.
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