Jan 12, 2022 - Politics & Policy

IRS "in crisis," government watchdog says

The seal of the Internal Revenue Service (IRS) hangs on a podium.

The seal of the Internal Revenue Service (IRS) at the agency's headquarters in Washington, D.C. Photo: Andrew Harrer/Bloomberg via Getty Images

The Internal Revenue Service began the last filing season with a backlog of 11.7 million returns from 2020, and the 2019 returns were not cleared until June 2021, according to a new report by the National Taxpayer Advocate.

Why it matters: "During 2021, tens of millions of taxpayers were forced to wait extraordinarily long periods of time for the IRS to process their tax returns, issue their refunds, and address their correspondence," wrote national taxpayer advocate Erin Collins, adding that "the IRS is in crisis."

Driving the news: The report details the millions of returns that are remaining from "the most challenging year taxpayers and tax professionals have ever experienced," Collins wrote.

  • The IRS received 17 million original Form 1040 returns on paper, the traditional individual income tax return, which have been taking at least eight months to process.
  • The IRS also reported more than 11 million "math error notices," which led taxpayers to submit a response to the error, "potentially delaying refunds by many months."
  • The IRS also has more than 2 million unprocessed employer’s quarterly returns and about 5 million pieces of taxpayer correspondence left to process, per the report.
  • The report also found that IRS customer service representatives answered about 11% of all of the calls from taxpayers seeking assistance — a demand that surged throughout the pandemic.

The big picture: The report comes days after the IRS on Monday warned that staffing shortages and backlogs could lead to a "frustrating" tax filing season, the Washington Post reports.

What they're saying: "There is no way to sugarcoat the year 2021 in tax administration: From the perspective of tens of millions of taxpayers, it was horrendous," per the report.

  • "Over the past year, there has been a tendency to focus on the unique challenges posed by the pandemic and to attribute IRS service and technology shortcomings to these circumstances."
  • "There is no doubt the pandemic has had a big impact, but taxpayer services and technology at the IRS were inadequate long before the pandemic."
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