IRS Continues to Face Operational Challenges
Several businesses (including some in New Jersey and Pennsylvania), individuals, families, and others dealing with estates and trusts have reported significant delays when dealing with the IRS. Not only does this include issues with receiving timely refunds, but also with communications and other services. This has many asking the question, “How are things going at the IRS?” According to recent research findings, not well.
Two issued reports from the Treasury Inspector General for Tax Administration and National Taxpayer Advocate Objectives Report to Congress provide details on just how challenging conditions have become. It was revealed the IRS was already struggling to keep up with demand when the pandemic unfolded, dealing a devastating blow to the agency. The situation was exacerbated when legislation was passed that made immediate changes to tax laws while also requiring stimulus checks be mailed to many taxpayers. The result has been the inability to meet demand and significant slowdowns unseen in recent years.
Key IRS Challenges
The current situation is a combination of factors that were made significantly worse by the pandemic, including;
- Workforce Shortages – Going into the 2021 filing season, the IRS remained understaffed, and operations were at partial capacity due to social distancing rules. The Consolidated Appropriations Act passed on December 27, 2020, further tasked the IRS with implementing new tax changes ahead of the filing season. As a result, thousands of positions within the agency are still unfilled, which only exacerbates the problem.
- Unprocessed Returns – At the end of 2020, more than 8.3M individual tax returns had yet to be processed – a 1,200% increase compared to other years.
- Closure of the Federal Records Center – The IRS stores tax returns and related records at Federal Records Center (FRC) locations, all of which closed in March 2020. Some offices reopened at half capacity by the end of May 2021, which significantly affected overall IRS operations. The report revealed that “As of March 31, 2021, IRS tax processing centers were using about seven trailers to store documents waiting to be sent to FRC.”
- IRS Telephone Service – The report noted that the IRS received more than 1,500 calls per second at tax season’s height. Toll-free telephone lines have slowly reopened as pandemic fears lessen, but the phones simply being offline for part of the tax season worsened the situation.
Addressing the Challenges
The good news is many are aware of the problem and have taken steps to remediate the situation. For example, the National Taxpayer Advocate has requested more funding for the IRS to meet its objectives better and serve taxpayers. Concurrently, the Biden Administration has allocated more than $80B to the agency over ten years, but this amount still needs to be approved by Congress.
For the fiscal year 2022, the National Taxpayer Advocate outlined eight objectives for continuous process improvement and customer service at the IRS.
- Expand Digital Interaction with Taxpayers
- Identify Case Processing Efficiencies
- Update Service Level Agreements
- Evaluate the Expansion of TAS Delegated Authorities
- Expand Outreach and Promote Faster Resolution of Taxpayer Issues
- Explore New Recruitment Opportunities to Support Increased Hiring Needs
- Revamp New Hire Training
- Expand Leadership Development Opportunities
It is not all doom and gloom at the IRS, however. Here’s just one example of how the National Taxpayer Advocate helped a taxpayer secure a 2019 refund that was improperly withheld.
Contact Us
The IRS and federal government need to take decisive action to address the backlog of unprocessed returns and other delays. For now, it appears we will all have to be patient and reset expectations as these issues are resolved. However, if you are experiencing problems with the IRS, including inadequate or inaccurate communication, and need additional guidance, Klatzkin can help. For more details, click here to contact us. We look forward to speaking with you soon.
©2021 Klatzkin & Company LLP. The above represents our best understanding and interpretation of the material covered as of this post’s date and does not constitute accounting, tax, or financial advice. Please consult your advisor concerning your specific situation.