The National Taxpayer Advocate Service (TAS) releases regular reports to Congress on the IRS and how they are performing on various issues. In particular the focus has been on tax return and refund processing delays, which have been ongoing causes of consternation for many filers.
Key findings from recent reports are shown below
2022 National Taxpayer Advocate (NTA) Report
The latest NTA report is out and key findings reinforce some of the ongoing frustrations many filers faced over the recent tax season with processing delays, especially related to paper filed returns. This includes:
- At the end of May, the IRS had a backlog of 21.3 million unprocessed paper tax returns, an increase of 1.3 million over the same time last year. They had however reduced the number of returns that had been suspended during processing and required manual review by IRS employees by over 10 million.
- The main reason that the IRS has failed to make progress in eliminating its paper backlog is because its pace of processing existing paper tax (e.g. from 2020) returns has not kept up with new returns submitted this year
- Before the pandemic, the IRS typically delivered refunds to paper-filers within four to six weeks. Over the past year, refund delays on paper-filed returns have generally exceeded six months, with delays of 10 months or more common for many taxpayers.
“Today, the digits on every paper return must be manually keystroked into IRS systems by an employee…. In the year 2022, that doesn’t just seem crazy. It is crazy.”NTAS report
- The IRS should have started dealing with processing delays and related staffing shortages last year and got ahead of the surge from recent years due to more Americans filing returns to claim missing stimulus credits and additional child tax credit payments. This would have reduced the inventory backlog carried into this filing season and accelerated the payment of refunds to millions of taxpayers.
- One of the biggest gripes from the IRS was that they didn’t have enough people to process returns. But the report finds that had the IRS quickly used some of the $1.5 billion of additional funds provided by the American Rescue Plan Act of 2021 (ARPA), which was enacted 15 months ago, to hire and train additional employees, it could have worked through the backlog, answered more taxpayer telephone calls and otherwise improved taxpayer service.”
- The IRS processed 5 million taxpayer responses to proposed adjustments. It took an average of 251 days to do so – more than eight months. That is more than triple the processing time of 74 days in fiscal year 2019, the most recent pre-pandemic year. The combination of the return processing delay and the correspondence processing delay may mean that the taxpayer must wait well over a year to get the issue resolved and receive the refund due
- There are currently over 336,000 taxpayers who could not file their returns or receive their refunds because identity thieves had already filed a return using their identifying information.
2021 TAS Report
Key findings from the 2021 report summary include:
The Where’s My Refund? tool or IRS2Go app does provide any details beyond the fact that the return has been received. Many frustrated taxpayers continue to check the tool or app daily, waiting to see if the “return was received” status has been updated to “refund has been sent”, or regularly check their mailbox waiting for a letter from the IRS explaining the delay.
For those taxpayers still waiting for information regarding the status of their return, they can review the IRS’ Tax Season Refund Frequently Asked Questions, review their account, or call the IRS for an update, but this may be frustrating because its level of service on its 1040 line remains extremely low, at about 9 percent for fiscal year (FY) 2021 to date.
Taxpayers can always check their transcript to see if the refund payment has been issued. However, as of August 2021, about 57 percent of taxpayers who attempted to access their online account were unable to do so. This is mainly because they are struggling to pass identity verification checks to setup an online account.
Married taxpayers filing a joint return shouldn’t be surprised if the refunded amount is higher than what they anticipated. It is our understanding that to expedite systemic adjustments to a taxpayer’s return, the IRS made assumptions which may have resulted in some taxpayers receiving a benefit larger than what they were expecting.
Although it is understandable that the IRS is still processing returns, it needs to provide taxpayers with regular and updated information on the filing season, and, as resources allow, enhance tools to provide taxpayers with more specific information on the processing of their returns and status of their refunds
Tax Return Delay Update (GAO report)
The anger and resentment is building up across millions of American tax payers who have been waiting weeks, if not months, to get their overdue IRS refunds and/or stimulus payments.
The IRS recently reported that they still have nearly 16 million unprocessed individual returns, which does not include amended returns (lower priority). This back log of unprocessed tax returns – covering current and past tax years – is a direct cause of delays in other IRS payments (e.g. Monthly CTC payments) which are dependent on a filers latest tax return data.
What’s worse is that many are waiting hours to talk to a live agent (see next section) and even if they get through to someone, they are just sent down further rabbit holes without much help or clarity to resolve their issues.
In a recent GAO report it was confirmed that delays and communication failings at the IRS are real (you are not alone) and unfortunately not getting better anytime soon. Key findings include:
- As of the end of the 2021 filing season, IRS had about 25.5 million unprocessed individual and business returns, including about 1.2 million returns from its 2020 backlog. This is nearly triple the amount pending at the end of the last tax season. As of July 2021, the backlog has dropped considerably, but still at record highs.
- IRS staff must manually review nearly 14 million tax returns with errors. These take much longer and if you are caught in this review then if could take months to get paid any overdue refunds (IRS has to pay interest) and related downstream payments.
- Overall the IRS processed around 150 million returns, so the unprocessed and errored returns make up nearly 25% of all returns. That’s a lot!
- With significantly more returns currently being held for manual review than in prior years, more taxpayers are struggling to get information about the status of their returns and refunds either by phone or online. The IRS’ website does not contain all of the relevant information regarding delays in processing 2021 returns and issuing taxpayers’ refunds.
- Additionally, IRS’s automated message on its toll-free telephone line for individual taxpayers has not been updated to explain refund delays or to include any other alerts associated with the 2021 filing season.
The GAO has recommended some simple measures to the IRS for addressing the above, like updating their website for clarity and adding more toll-free telephone lines to support and provide more information for individual refund delays. This is not new and I have been saying it on this site for a while. I just hope the IRS is able to respond sooner rather than later.
What can’t I get through to a Live Agent?
The answer is simply these agents that provide telephone assistance to taxpayers have too much on with all the new stimulus and refund payments (e.g. Unemployment refund checks) and prior year tax return backlogs to process; and there simply aren’t enough agents to do the work or handle the ever increasing volume of calls from taxpayers.
This means ongoing delays for tax payers looking for guidance and information on their return or refund.
During the latest tax season, the IRS is only answered half of calls received, and the average wait time was 17 minutes, compared to 4-minute wait during last year’s first week. Taxpayers calling to make payment arrangements had it worse. During the first week of filing season, 93.3% of taxpayers calling to make payment arrangements were unable to speak to a live representative; those who got through waited an average of 81 minutes. That compares to a 42% fail rate and a 30-minute average wait time the first week of filing season last year.TAS/GAO
As their latest IRS Data book report shows the IRS telephone assistance service experienced a 40% rise in live telephone calls over the last year. For the latest tax year the trend of long wait times to talk to a real IRS agent will likely persist. The WMR site however still remains the most common (and most efficient) channel for folks to get updates on their tax return and refunds.
The IRS recommends contacting them directly only 21 days after your return is successfully submitted and under processing. But a number of people have been waiting for much longer than that and are desperate to get an update on their refund status, which is not always clear from the WMR tool. Talking to a tax advocate can be helpful, but for specific details a real IRS tax agent is the best way to get a definite answer.
If you have tried to get through and keep seeing delays, hopefully you realize that it’s likely not due to anything wrong you are doing. Its just that with all the IRS funding cuts, there are not enough “live” agents to answer all the questions that come up around the complexities and vagaries of the American tax code/system.