Taxpayers Are Still Facing ‘Unprecedented Delays’ Even as IRS Claims Progress on Last Year’s Backlog
The agency's overall backlog is growing and its processing time is slowing.
While the Internal Revenue Service has made significant progress in slashing the backlog of tax returns from 2021, it is now processing the filings at a slower clip and taxpayers are facing unprecedented months of delays before receiving their refunds.
IRS boasted this week that it has made major strides to dig out from the mountain of unprocessed cases, but National Taxpayer Advocate Erin Collins said in a new report issued Wednesday things have not actually improved. Despite all of the agency’s efforts, the backlog has actually grown since the same period last year and IRS remains unlikely to meet its year-end goals.
“Taxpayers are still experiencing unprecedented delays in receiving their refunds,” Collins wrote. “Taxpayers continue to face unprecedented challenges in reaching the IRS by phone. And the IRS’s unprecedented delays in processing correspondence are contributing to additional refund delays and taxpayer frustrations.”
Collins noted that IRS was processing 242,000 individual paper income tax returns per week in April, but that had declined by 15% in May. The agency would have to process 500,000 forms per week to eliminate the backlog this year. She added it was “deeply concerning” that IRS ended May with a bigger backlog of paper tax returns than it had one year prior.
“The math is daunting,” Collins said. She added she was pleased IRS leadership committed to reducing the backlog to a “healthy” level by the end of the year, but said it “will be a difficult commitment to achieve.” Additionally, she stressed that IRS is now taking six months to distribute refunds to paper-filing taxpayers and implored IRS management to get that down to the normal four-to-six week period before it considers any backlog “healthy.”
Despite the ongoing problems, IRS announced it would complete the processing of individual tax returns without issues from 2021 this week. It will complete business returns filed in 2021 shortly thereafter. As of April, there were still 6 million returns outstanding. The agency has taken several steps to address the backlog, including mandating overtime for 6,000 employees and allowing for voluntary overtime for an additional 10,000 workers, deploying surge teams, bringing on contractors and going on a hiring spree aided by a hastened onboarding process authorized by Congress.
"IRS employees have been working tirelessly to process these tax returns as quickly as possible and help people who are waiting on refunds or resolution of an account issue," IRS Commissioner Chuck Rettig said. "Completing the individual returns filed last year with no errors is a major milestone, but there is still work to do.”
The taxpayer advocate did note that things have mostly gone smoothly for e-filers, or about 85% of taxpayers. By late May, IRS had received 145 million returns and processed refunds for 66% of them. Overall, however, the backlog has actually grown since the end of May 2021. It is now at 21.3 million, compared to 20 million last year. IRS noted much of this year’s backlog consists of original returns, which can be processed more quickly than amended returns.
Earlier this year, Rettig announced a plan to hire 10,000 new employees by the end of 2023. He told Congress in April the agency was halfway to its goal for 2022. Collins, however, noted IRS had hoped to hire around 5,500 processing employees this year and as of May was more than 3,400 workers short of that goal. It has found more success in hiring for accounts management—workers who handle taxpayer interactions, including by answering calls—hiring 99% of its goal of 5,000 employees.
Still, the agency has struggled immensely to keep pace with demand for service. The number of calls IRS received dropped by more than half this year, but it only grew its answer rate from 9% in 2021 to 10% in 2022. Individuals waited on hold for an average of 29 minutes, up from 20 minutes last year. The agency failed to improve its answer rate as it shifted employees in Accounts Management away from the phones and toward processing correspondence.
“We remain focused on doing everything possible to expedite processing of these tax returns, and we continue to add more people to this effort as our hiring efforts continue this summer," Rettig said.
Collins said IRS should have acted more quickly to reassign employees to processing functions, which would have reduced the existing backlog and allowed the agency to address this year’s returns more quickly. She also faulted IRS for dragging its feet in installing new technology to read paper returns more quickly.
The taxpayer advocate said she would push IRS management over the next year to automate paper returns processing, reduce barriers to e-filing, improve hiring and training and improve telephone service. Congress provided IRS with a funding boost of $675 million as part of the fiscal 2022 omnibus spending bill, a 6% increase and the largest bump since 2001. President Biden requested an additional 18% bump for fiscal 2023, and has sought an $80 billion surge over 10 years as part of his larger social and climate spending package.