Taxpayers looking to treat themselves this year with their tax refund money may have to wait until next year to receive their rewards after the IRS found backlogs were more than double what was previously reported.
The Internal Revenue Service is still trying to process about 24 million tax returns from last year, according to a Washington Post report.
This is more than double the 11.4 million unprocessed business and individual returns reported by the tax agency in mid-December 2021.
The bureaucratic mess threatens to delay the return of many taxes for 10 months or more.
The Biden administration is pledging to spend $80 billion on the Internal Revenue Service, which has reduced staff over the past two decades. The workforce is at the level of the 1970s, despite the growth of the population of the United States. Pictured to the left are Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig, who were both involved in the scandal.
Data provided by the DC newspaper showed that 23.7 million individual and business returns are being held up because they require a “manual process” – meaning that someone at the tax office has to work with them rather than submit them through an automated system.
This human factor bottleneck means data processing in 2022 will also be affected, the Treasury Department warned in January.
Erin Collins, national taxpayer attorney, seen here, said the pandemic has severely limited the IRS’s ability to process tax returns and suggested the agency ease the penalties for taxpayers.
9.7 million paper declarations are pending processing, 4.1 million had errors with stimulus payments, Covid-19 relief funds or other issues, and 4.1 million declarations were changed after filing. There were 5.8 million sets of correspondence between the IRS and the Americans that needed to be resolved before the papers were even signed.
National Taxpayer Advocate Erin Collins wrote a letter recommending that the IRS delay or suspend the collection of certain taxes and penalties due to the backlog.
“The coronavirus pandemic has created huge challenges for taxpayers, tax professionals and the IRS. The time has come to take action to improve the situation,” the NATR letter says. “The implementation of reasonable penalty mitigation measures that the IRS can offer immediately is essential to help not only taxpayers and tax professionals, but the IRS during these difficult times.”
The IRS has been tasked with issuing stimulus checks and overseeing new child support policies, as well as dealing with an increase in jobless claims — all during a pandemic and on a reduced budget.
IRS Commissioner Charles Rettig sent a letter to Congress this week blaming a lack of funds to hire new staff and the agency’s outdated computer software.
He considers Collins’ proposal to cancel the penalty.
“We will quickly adapt to changing circumstances when appropriate,” Rettig wrote in the letter. “We are doing our best with all the resources available to us.”
The IRS has had a busy two years doing double duty distributing pandemic allowances and child tax credits and processing tax returns. The agency also faced the same work-from-home restrictions that disrupted business for everyone.
A staffing shortage, fueled by two decades of neglect by both Republicans and Democrats, promises to further exacerbate the slowdown. The agency has lost 17,000 law enforcement officers in the past 10 years and has the fewest auditors since World War II.
The IRS has reassigned 1,200 employees to its “fast-track team” to help eliminate backlogs and intended to hire 5,000 new employees by this tax season, but has only added 200 people so far, according to the Post.
The IRS owes nearly $24 million in revenue for 2020, double what the agency reported last December. A delay in processing returns may result in a delay in tax refunds for this tax season.
The Biden administration is seeking $80 billion in funding for the agency over the next decade to restore some of what has been lost through neglect.
According to the Post, a faction of 30 Republicans wrote a letter to Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig calling the agency’s work “untenable.”
But Democrats say Republicans have been the problem.
“Republicans have been defunding the IRS for decades, and now American taxpayers are paying the price,” Congressman Richard E. Neal (D-Mass.), chairman of the House Ways and Means Committee on taxation, told the Washington Post. . “Delays in tax returns are just one symptom of a fundamental problem that has plagued the IRS for far too long: a lack of resources.”
Most Americans now file their returns electronically, which are processed quickly, but paper returns still make up about 10 percent of applications, or 17 million forms.
Paper 1040 tax forms filed in 2020 take nearly a year to process, the Post said, and the agency only has until April 2021 for error-free forms.
According to the newspaper, about 77 percent of American taxpayers received tax returns last year.