Taxpayer Advocate Calls IRS Backlog 'Historically High'

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Most taxpayers had their returns processed and refunds sent to them in a timely fashion, but a backlog of 35 million business and individual tax returns remained at the end of the filing season, according to a National Taxpayer Advocate report.

That’s because those returns need manual processing, or employee involvement, before a return can advance to the next stage of processing. The backlog includes about 16.8 million paper tax returns waiting to be processed, about 15.8 million returns suspended during processing that require further review, and about 2.7 million amended returns awaiting processing, wrote the National Taxpayer Advocate on Wednesday. National Taxpayer Advocate is an independent organization within the IRS. 

“The backlog resulted largely from the pandemic-related evacuation order that restricted employee access to IRS facilities,” National Taxpayer Advocate Erin Collins said in a statement accompanying the report. Programming changes necessitated by new tax legislation and the responsibility for distributing three rounds of stimulus payments also contributed to the “historically high” number of backlogged returns, she said.

When the government shut down the economy and asked people to stay indoors to slow the spread of COVID-19 last year, the government stepped in and provided multiple stimulus checks and other enhanced benefits to millions of people who lost their jobs. The IRS was responsible for distributing these benefits and also later, after tax season had started, pivoting to correct early returns to account for a retroactive tax exclusion on unemployment income passed with President Joe Biden’s American Rescue Plan in March. All of this, combined with the shutdown of its offices during the pandemic that restricted employee access to IRS facilities, led to the significant backlog and poorer customer service.

The IRS received a record 167 million telephone calls, more than four times as many calls as during the 2019 filing season. Only 7% of taxpayer calls reached an IRS representative, and on  the “1040” line, the most frequently called IRS toll-free number, taxpayers placed about 85 million calls, with only 3% reaching an assistant. “IRS employees could not keep pace with this massive volume of calls, resulting in the poorest service ever,” Collins said.

“I’ve likened this filing season to a perfect storm,” Collins said in a blog post on Thursday.

To avoid repeating some of these issues in next year’s tax season, Collins recommended the IRS should:

  • Allow more online interaction with customers and their tax practitioners;, 
  • Expand use of telephone callback technology, especially on the busiest toll-free numbers so people don’t have to wait on the line;
  • Address various e-filing issues so more people can file electronically; 
  • Scan paper returns instead of having employees re-enter the data manually. 
  • Continue to accept digital and transmission of documents and digital signatures; and 
  • Offer videoconferencing options for taxpayers.

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