This morning, The National Taxpayer Advocate issued her semi-annual report to Congress. In the report is the true state of tax returns at the IRS. Fair warning, it’s not a pretty picture.
As of the close of the filing season (late May), there were 35.3 million tax returns that were unprocessed. This includes:
- 1.1 million paper returns received in 2020 (100,000 for individuals and 1 million for businesses);
- 15.7 million paper returns received in 2021 (6 million for individuals, 4.6 million for businesses, and 5.1 million “unspecified”);
- 10.3 million returns awaiting “Error Resolution” (9.8 million for individuals, 500,000 for businesses);
- 1.4 million returns that are “Processing Rejects” (1.2 million for individuals, 200,000 for businesses);
- 2 million returns that are “Unpostable” (1.1 million for individuals, 900,000 for businesses); and
- 2.1 million ID Theft returns (all individuals).
And if you called the IRS general phone line for individuals, you had a 3% chance of getting through! (This is actually better than the Taxpayer Advocate’s initial estimate of 2%, not that there’s a significant difference here). Tax professionals have special phone numbers to call. I found that I had about a 5% chance of getting through–or a 95% chance of not getting through. And I pity those who had to go through Identity Verification. The IRS increased the number of returns subject to this while phone staffing on these lines decreased. The Taxpayer Advocate called it a “Historically low level of IRS telephone service.” I won’t argue.
While I expect things to improve, it’s likely going to take years for the IRS to work through the backlog. I currently quote to my clients the following timelines:
- Processing time for a paper return: 10 months
- Processing time for an amended return: 12 months
- Processing time for your refund if you do not get it in the first month after e-filing: 5 months
The above numbers are averages. I had a client (who I helped come into compliance) file back returns last year. One return took 16 months to be processed. That return was incorrectly processed by the IRS, so a letter must be sent (so the client is likely looking at another few months before it’s correctly processed).
The IRS is doing better on correspondence (the average response time is 6 months), but it’s nothing to write home about. An issue not mentioned in the report is the IRS issuing Notices of Deficiency prior to reading correspondence addressing underlying issues (thus, the notices should not have been issued). I know that the Taxpayer Advocate is working on this systemic issue, but a resolution is, unfortunately, unlikely in the near future.
I do expect the IRS Service Centers to be restaffed this Fall, and this will then start to help on reducing the backlog. Unfortunately, a backlog that was built over 18 months will take at least that long to be undone.
Tags: 2021.Tax.Season