Everyone makes math mistakes. When we last heard from IRS Commissioner Chuck Rettig, the backlog of unprocessed returns was down to about 6 million. Per the Washington Post, that was slightly off–well, a bit more than slightly. The true backlog is 23.8 Million, a difference of about 18 million returns. True, this does include unopened correspondence–but that correspondence also likely includes returns.
Of course, you can try calling the IRS up. I generally do multiple times during a week. I have about twelve items I need to get resolved and (in theory) I can over the phone, (a) if I get through, (b) I speak to an IRS employee who can resolve the issue, and (c) don’t get hung up on. Here’s an example: A client paid his tax in October, the IRS cashed the check, but the payment isn’t posted on his account. He just received a CP504 notice, gave me a Power of Attorney, and sent me a copy of the front and back of the check (and it absolutely cleared).
The first issue is calling the IRS. I’m in the Pacific time zone, so when I call at 7am (the earliest time I can call), I’m competing against everyone else in the US. On Monday I couldn’t get through to the Practitioner Priority Service (PPS). I made ten attempts, and then stopped as I had a full day of appointments. On Tuesday, I reached the IRS–and was not even on hold! That’s akin to a one-outer in poker. The helpful IRS employee (and do note that every IRS employee I’ve dealt with on PPS has been very helpful) could not help me; she did not have access to the computer system that allowed transferring of payments. She transferred me…and I was on hold with a hold time given of “between 30 and 60 minutes.” 90 minutes later, the IRS system hung up on me (I think it may be programmed to do that when you’re on a call and it lasts two hours). I couldn’t try to call again on Tuesday, because I had appointments.
On Wednesday, my fourth try to PPS resulted in a callback from the IRS 30 minutes later. This employee found my client’s payment, and then started the work to move the payment–which apparently was a lot more complex than either he or I thought it would be. Every five to seven minutes he’d get back on the line stating he was still working on this form to move the payment. After 100 minutes, the system hung up on me. On his last “I need another five to seven minutes” he said he was close to having this resolved. But I don’t know for sure.
On Thursday I had an outside appointment, and by the time I got into the office I didn’t have an open two hours to call the IRS. (I can work while I’m on the phone with the IRS, but I can’t have a scheduled call or appointment.) On Friday, I didn’t get through to the IRS. On Monday, my first scheduled call is at 11am, so I am hopeful I can confirm that this payment has been resolved, and then go on to issue number two (a 2016 return that still hasn’t been processed).
Last week, 30 Senate Republicans wrote a letter to Treasury Secretary Janet Yellen and Commissioner Rettig that the situation is untenable. They’re correct. So what can we do–given that it’s likely impossible to salvage the 2022 Tax Filing Season from being on the level of disastrous? I have some ideas:
- Drop the Schedule K-2 and K-3 requirements for all but the largest partnership and S-Corporations (say, $25 million in gross income or more) for 2021 returns. This will (a) eliminate even more paperwork for the IRS to process (currently, K-2s and K-3s must be attached as pdf’s to returns; this requires the IRS to do special processing), (b) help the tax professional community, and (c) help most taxpayers where these documents add just filing requirements with no tangible benefits to anyone.
- Get all IRS employees who are supposed to work in IRS Service Centers back in the Service Centers. Yes, Covid still exists but it’s going to be with us (likely) forever. This can be done by Presidential executive order–and Treasury Secretary Yellen and IRS Commissioner Rettig should be demanding this. This will eliminate the issue with “error” returns (see below). Additionally, it will increase IRS efficiency: employees will be in the locations they should be in.
- Start posting realistic time-frames for processing of paper returns. I’m quoting 12 months for a paper-filed tax return and 18 months for a paper-filed amended return. For electronically filed tax returns, I’m quoting two to four weeks if you’re in the lucky 90% that don’t get an error/reject and nine months if you’re in the unlucky 10% that does get an error/reject. For electronically filed amended returns, I’m quoting one year for processing. (All time-frames are averages.) If my suggestion about getting employees back in the Service Centers is acted on, that will reduce the backlog of returns as error/reject returns won’t take the months that they currently take to be resolved (pre-Covid, they took three to four days).
- Listen to TIGTA (the Treasury Inspector General for Tax Administration) and spend what technology money you have wisely. Yesterday, TIGTA released a report noting that the IRS cost the US $56 million in interest payments because of outdated mail processing equipment that would cost between $360,000 to $650,000 to replace.
- Work with Congressional leadership to get the budget increased for improved technology, not snooping on bank records. Secretary Yellen and Commissioner Rettig can point out that improved technology would allow for far greater efficiency within the IRS. Do you know that the main IRS computer system dates from 1959 and uses COBOL, and the last major improvements date from the 1980s? Given the current situation, there should be bipartisan support for this. Yes, this wouldn’t have benefits for a few years but we have to start somewhere.
- Work with Congressional leadership to increase starting wages for IRS employees. The IRS is trying to hire more individuals (including in customer service), but has only hired 10% of the number they want to hire (and are budgeted to hire).
By the way, do you know how many IRS employees there are per phone call coming in to the IRS? For every 16,000 calls, there’s one employee. (Yes, employees take more than one call a day, but if you wonder why you and I can’t get through, that’s the answer.)
What does this mean for the 2022 Tax Season? If your tax professional doesn’t have gray hair, he or she will by October 15th. If you need to call the IRS, budget a day to get through (you will likely need it). If you have to write the IRS (or submit a paper return) and need a quick response, consider a prayer: It can’t hurt and it just might help. And hug your tax professional; he or she will appreciate it.
