RS in chaos: Nearly 35 million tax returns are STILL unprocessed


The Internal Revenue Service is facing a backlog of 35 million unprocessed tax returns, according to a government watchdog, as the pandemic and economic relief efforts combined to overwhelm the agency and force some people to spend hours chasing their overdue refunds.

The National Taxpayer Advocate (NTA) submits two reports to Congress each year: an Annual Report, delivered in January, and an Objectives Report, delivered in June.

In its most recent report, the NTA states: ‘It was perhaps the most challenging filing season taxpayers, tax professionals, and the IRS have ever experienced.’

One of their most important phone lines – the 1040 customer support lines for individual tax returns – reported that only three per cent of the 85 million callers got through to a human being.

The NTA published in June their most recent report, showing how the IRS is performing. The government watchdog found that the IRS had been confronted by a ‘perfect storm’ of pandemic problems, increased demands placed upon it, and budget cuts

Erin Collins, the National Taxpayer Advocate, is seen in May speaking before a Congressional committee - the Financial Services and General Government Subcommittee hearing on 'Internal Revenue Service: Narrowing the Tax Gap and Improving Taxpayer Services'. In her report she strongly criticized the IRS's current performance

Erin Collins, the National Taxpayer Advocate, is seen in May speaking before a Congressional committee – the Financial Services and General Government Subcommittee hearing on ‘Internal Revenue Service: Narrowing the Tax Gap and Improving Taxpayer Services’. In her report she strongly criticized the IRS’s current performance

The NTA found that about 17 million paper tax returns are still waiting to be processed and approximately 16 million additional returns have been placed on hold because they require further review manually.

Another 2.7 million amended tax returns have not been processed.

Michelle Singletary, a Washington Post columnist, said the IRS was ‘critically malfunctioning’.

She said that she had been trying to resolve a problem since November.

‘The agency is a hot mess. You are right to be mad as hell when you can’t reach somebody to help explain why your filing or refund hasn’t been processed,’ she wrote.

‘And, yes, I cussed, because the time to be polite and forgiving for the failures at the IRS is so over.’

The IRS has been tasked with dolling out stimulus checks and overseeing new child benefit policies, plus coping with an increase in unemployment claims - all during a pandemic, and on a reduced budget

The IRS has been tasked with dolling out stimulus checks and overseeing new child benefit policies, plus coping with an increase in unemployment claims – all during a pandemic, and on a reduced budget

The backlog is four times that of 2019, when the IRS had 7.4 million unprocessed returns.

The authors noted, however, that the data was up until May, and so the backlog may have reduced since then.

The delay means that millions of people are left waiting for their returns – 70 per cent of individual income tax returns included refunds, the NTA found, with an average of $2,800.

‘Processing delays matter greatly because most taxpayers overpay their tax during the year via wage withholding or quarterly payments and are entitled to receive refunds,’ said Erin Collins, the taxpayer advocate, in her report.

The IRS on Wednesday took issue with the NTA’s findings, saying it does ‘not reflect the current situation at the IRS.’

It said: ‘Phone demand has been at historically high levels, never seen before.

‘Our ability to answer phone calls reflects the amount of staffing available.’

The statement also said some of the returns counted by the advocate ‘does not necessarily reflect unprocessed tax returns,’ citing as many as 2.1 million individual and business tax returns are related to identity theft cases.

The IRS backlog, as of May, amounts to 35 million filings

The IRS backlog, as of May, amounts to 35 million filings

Charles P. Rettig, the IRS commissioner (pictured on June 8 in Congress) has defended the work of his organization

Charles P. Rettig, the IRS commissioner (pictured on June 8 in Congress) has defended the work of his organization

IRS Commissioner Charles P. Rettig also told the Senate Finance Committee earlier this month that the agency had processed more than 137 million individual income returns and sent refunds totaling more than $281 billion.

The overwhelming majority of the 35 million unprocessed returns are for the 2020 filing season that were filed in 2021.

The IRS has been facing what the NTA described as ‘a perfect storm’.

Despite severe cuts over the last decade, the IRS had to issue a third round of economic relief payments, implement new rules affecting unemployment benefits, and new guidelines for eligibility around other tax credits.

The IRS is also now responsible for new child benefits – despite, between 2010 and 2019, the IRS’ budget falling 20 per cent, with the number of full-time employees dropping by a similar amount.

John Koskinen, who served as IRS commissioner under Presidents Barack Obama and Donald Trump, said the IRS did not have sufficient manpower or funding to do its job.

‘It’s a problem, but nobody should be surprised,’ he told The Washington Post.

John Koskinen, a former head of the IRS, is seen testifying before Congress in May 2016

John Koskinen, a former head of the IRS, is seen testifying before Congress in May 2016

‘You can’t keep loading more things on an agency without enough people and expect things to go smoothly.

‘The problem is not with IRS employees who work very hard. It’s with Republicans in Congress who have refused to provide adequate funding for 10 years.’

Republicans led the cuts to the IRS budget, but Joe Biden has pushed to increase the agency’s funding by as much as $80 billion to crack down on tax cheats.

A bipartisan infrastructure deal reached with the White House earlier this month includes as much as $40 billion in additional funding for the agency, although it is unclear when that may pass.



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