Historic Backlogs at the IRS Persist

How is the IRS doing? According to key leaders on the inside, not so good. The Treasury Inspector General for Taxpayer Administration’s (TIGTA) interim report combined with the National Taxpayer Advocate’s midyear report highlighted a federal agency that was already struggling to keep up … and then COVID-19 hit. Subsequent rounds of stimulus legislation and changing tax laws created what Erin Collins, National Taxpayer Advocate, called a “perfect storm.” The result has been significant delays in receiving refunds, communications, and processing, leaving many Atlanta taxpayers frustrated and looking for answers. To help clients, prospects, and others understand what is happening at the IRS, Wilson Lewis has provided a summary of the report details below.

What’s the Problem?

The agency is facing significant challenges across many areas, but the most prominent is the delays in processing tax returns. At the start of 2020, there were more than 8.3M individual tax returns that had yet to be processed, a 1,200% increase over traditional years. Beyond return processing, there are delays in several other departments impacting taxpayers, including;

• Accounts Management – This function is responsible for addressing questions about tax laws, the status of returns, specific account information, and making account adjustments when necessary. At the end of last year, it was reported there are over 5M individual and business taxpayer cases that still need to be reviewed and addressed. The result is that those needing assistance with a specific issue are unable to connect with a representative to address the matter.
• Income Verification Express Service – This function assists the lending industry and is focused on providing income verification for mortgage loans. As of March 20, 2021, it was reported there are over 219,000 requests for information that need to be processed. While less of an issue, it appears those applying for a mortgage will need to rely on other means to verify income with potential lenders.
• Return and Income Verification Service – This function processes request for tax return and account information transcripts, verification of non-filing, and requests for wage and income information. It was reported that as of March 20, 2021, there were over 413,000 cases that have yet to be addressed in inventory. This delay has forced many to simply delay requests or find another method of verification.

Why is it Happening?

The National Taxpayer Advocate’s midyear report and TIGTA’s Interim Results of the 2021 Filing Season further discussed specific and somewhat historic issues the agency faced and how these issues contributed to overall performance and response times. The top issues identified include:

• Hiring Challenges – One reason for the agency’s inability to meet current demand is a shortage of staff. To resolve this, the IRS has ramped up hiring efforts to attract the needed professionals to a career with the agency. Unfortunately, there continues to be significant difficulties in hiring. As of March 5, 2021, the IRS has over 4400 open positions in submission processing alone that remain unfilled.
• Identity Theft – Cases of identity theft and fraud tend to peak during disasters, and COVID-19 was certainly no exception. In any tax year, taxpayers are susceptible to identity and tax-related theft. In the 2021 filing season, the IRS had selected more than triple the number of returns for potentially fraudulent activity compared to 2019 and confirmed double the amount of confirmed identity theft cases. When a tax return is flagged for potential fraud, the taxpayer must go through a process to authenticate his or her identity, which slows down processing time considerably.
• IRS Telephone Service – The report noted that at tax season’s height, the IRS received more than 1,500 calls per second. Toll-free telephone lines had been slowly reopened as pandemic fears lessened, but the phones simply being offline for part of tax season made the situation worse.
• Lack of Working Printers and Copiers – Making matters worse, about 42% of available printers and copiers in IRS Tax Processing Centers were unusable or broken. “This issue significantly affects the Return and Income Verification Services functions that process requests for tax return and account information transcripts, verification of non-filing, and requests for wage and income information,” the report noted.

Contact Us

The operational issues plaguing the IRS are certainly being felt by Atlanta individuals, businesses, and families. Although the Biden Administration and others are working to resolve these issues, it is likely delays will continue in the immediate future. If you have questions about the information outlined above or need assistance with a tax planning or compliance issue, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.