According to a report released Wednesday by the Taxpayer Advocate Service, an independent organization within the IRS, about 23 million of these statements have been submitted by individuals who may be awaiting refunds or stimulus checks. The rest are business tax returns. The challenges of working during the pandemic, combined with last-minute tax changes made by Congress aimed at taking relief from struggling Americans, created a difficult tax filing season for the IRS, whose budget has shrunk over the past decade.
The agency started the year with a backlog of returns from the 2020 registration season, which coincided with the outbreak of the pandemic. While the registration season was bumpy last year, the number of unprocessed returns in mid-May was still more than double what it was in 2020.
“This filing season was the quintessence of a perfect storm – a particularly bad or critical condition resulting from several negative and unpredictable factors – which resulted in millions of taxpayers having difficulty and uncertainty in getting a living assistant,” wrote Erin Collins , the National Taxpayers Lawyer.
Due to the reduction in personal service during the pandemic and the new tax changes, the IRS received nearly four times as many calls this year as it did in 2018 – and only 9% of callers were able to reach a live person to ask for help, according to the report .
‘Significant delays’ in manual processing
This year there have been more returns that required manual processing, causing “significant delays,” Collins wrote.
About 5 million are being screened for disagreement over how much applicants were asking for their stimulus payments. Taxpayers who missed their stimulus checks or who were owed more than they originally received because they lost their jobs during the pandemic will be able to claim the difference on their tax returns. However, if the amount they claim does not match the IRS records, the agency will need to conduct manual reviews.
The tax law changes in December and March left the agency little to no time to update its system. One of the changes allowed taxpayers to claim higher income tax credits or child tax credits if they lost income in 2020. However, an IRS employee must review the tax returns of taxpayers who have opted for this benefit and look back on their 2019 income.
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Processing of another 2 million returns has been suspended due to possible identity theft. That’s 800,000 returns in 2019, the last year before the pandemic. The Taxpayer Advocate Service report says the increase in allegations of fraud this year is partly due to the three rounds of stimulus payments that made more cash available.
42% of the printers do not work
The IRS has cut its budget by about 20% over the past decade, leaving it with outdated technology and fewer staff. If current trends continue, the agency could retire or leave for other jobs over 32% of its 81,000 employees next year.
The backlog is also due to a lack of working printers. According to the report, approximately 42% of the printers and copiers used for the IRS processing functions were defective as of March.
The IRS, in response to the independent report, said it had taken great strides over the past two years to streamline the hiring. It also continues to improve phone service for taxpayers and allow more employees to work virtually.
Despite challenges, the IRS processed 136 million individual tax returns and issued 96 million refunds totaling $ 270 billion during the 2021 filing season. It has also successfully completed three rounds of stimulus checks for a total of approximately 475 million payments valued at $ 807 billion.