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Unprocessed Tax Returns Reach 24 Million<\/strong><\/p>\n\n\n\n Per the Associated Press, nearly 24 million taxpayers are still waiting for the Internal Revenue Service to process their tax returns from last year \u2014 a number far larger than the previously reported 11.6 million by the agency \u2014 with many unprocessed refunds held up for 10 months or more.<\/p>\n\n\n\n Per Anonymous IRS Sources<\/strong><\/p>\n\n\n\n The pileup of work that remains from last year, according to three people who spoke on the condition of anonymity because they were not approved to speak publicly, comes as the tax agency struggles to hire and train new staff, and respond to growing bipartisan pressure from lawmakers and tax preparers to clear the logjam and provide relief to taxpayers.<\/p>\n\n\n\n Hiring of IRS Employees<\/strong> – Help on the Way?<\/strong><\/p>\n\n\n\n IRS Commissioner Charles Rettig has announced that the IRS is hiring new employees to address this backlog of unprocessed tax returns. Really? The IRS processing employees are usually hired at the GS-3 level – at a salary of $24,749. How many job seekers will there be at this pay level? Hard to say, because the federal government does have a very attractive benefit package and does offer advancement opportunities. <\/p>\n\n\n\n Once the employees are hired, they need to be trained. How long will that process take? <\/p>\n\n\n\n Looking at past hiring success at the IRS may give us an idea. The IRS sought to fill 5,000 positions for several campuses across the country in time for this tax season, but was able to hire less than 200<\/strong>. The situation is so dire that for the first time, officials are offering $500 referral bonuses to employees if a new hire stays in the job for a year. The agency has one of the government\u2019s oldest work forces. The IRS has been experiencing far more retirements of experienced agents than they can possibly replace. Its submission processing unit \u2014 responsible for opening the mail \u2014 lost 20 percent of its staff last year to retirements, departures and transfers to other IRS departments, officials said. The Treasury Inspector General for Tax Administration\u00a0reported that as of August 2021, IRS faced a total staff shortfall in the submission processing unit of about 2,598 persons. <\/p>\n\n\n\n The IRS’s Taxpayer Advocate Office (TAO) stated that although the IRS has several initiatives underway to help address its hiring shortages, \u201c… to date these approaches have not been successful.\u201d It urged the agency to delay a planned closure of its processing center in Austin \u2014 part of a long-term consolidation as more business is done electronically \u2014 \u201cuntil hiring and backlog shortages are addressed.\u201d [DUH! The IRS was oblivious to the ramifications of shutting down one of its processing centers.]<\/em><\/p>\n\n\n\n The TAO office stated that “Just like many industries across the country, jobs are available, but people are not applying. In [our case,] applicants may not like the shifts or pay \u2014 many of these are lower graded positions that were below the $15.00 minimum hourly rate.\u201d <\/p>\n\n\n\n The IRS is considering reallocating its human resources by deploying agents from other departments to the tax return processing unit. Great. Help solve one problem by creating manpower shortages in other areas. And how will those redeployed agents feel about being assigned to open the mail?<\/p>\n\n\n\n Congressional Considerations<\/strong><\/p>\n\n\n\n Currently, the politicians who greatly contributed to this backlog of returns due to last minute tax law changes, expanding IRS’s responsibilities, and cutting back on its budget are now advocates for applying pressure on the IRS to clear its logjam. Many taxpayers and tax professionals have written to their Congressional representatives about the chaos at the IRS. Perhaps with mid-term elections approaching, Congress will do something to save face.<\/p>\n\n\n\n One proposal to reduce the backlog includes suspending tax collections and excusing some penalty enforcement. The IRS collection notices that are being suspended are mostly those that are computer generated. Hence, there would be no meaningful manpower hours saved. A potential downside to not sending these computer-generated notices is that they warn taxpayers of their tax filing and tax remittance responsibilities. They are the predecessor to the final intent to levy notice. So if the IRS does away with the warning notices and is required by statute to send it notice of intent to levy, is this really anything more than rhetoric to appease its critics? Imagine the reaction of taxpayers when they receive a notice of intent to levy their bank accounts, social security, retirement benefits, and wages without receiving the advance warning notices. <\/p>\n\n\n\n The IRS inspector general found that the IRS continues to suffer from severe hiring shortages, inefficient practices and old equipment (some IRS computers date back to the 1960’s). That includes mail processing woes, since its systems have \u201coutdated dust collectors\u201d that cause paper jams. Poor scanners, meanwhile, meant the IRS last year missed out on $56 million because of \u201cuntimely check deposits,\u201d since the agency could not tell if envelopes it received contained checks.<\/p>\n\n\n\n The Backlog Numbers<\/strong><\/p>\n\n\n\n As of Jan. 28, the tally of outstanding individual and business returns requiring what the IRS calls \u201cmanual processing\u201d \u2014 an operation where an employee must take at least one action rather than relying on an automated system to move the case \u2014 came to 23.7 million, the taxpayer advocate data shows. The number includes 9.7 million paper returns awaiting processing; another 4.1 million that were suspended because of errors with stimulus payments, pandemic relief or other issues; 4.1 million amended returns and 5.8 million pieces of correspondence awaiting action between the agency and taxpayers to resolve issues before the returns are completed. In January, National Taxpayer Advocate Erin Collins had reported a backlog of at least 10 million returns based on IRS data. An IRS official, meantime, said the agency counts the inventory from last year\u2019s filing season at about 6 million paper returns for individual taxpayers. Both numbers are far higher than the unprocessed returns the IRS faced before the pandemic \u2014 in the past, the agency typically carried over 1 million or fewer returns into the next tax season. The stockpile does not include audits lingering because of pandemic slowdowns, enforcement and collection actions, appeals of audits, notices of tax liens, penalties or other business in the pipeline. <\/p>\n\n\n\n Tip <\/strong>#1<\/p>\n\n\n\n Electronically file your return if you are not already doing so. File ASAP! E-filed returns can generally be processed quickly unless they are flagged for errors, identity theft or other issues. The IRS is taking approximately ten months to process the paper returns of roughly 10 percent \u2014 about 17 million people \u2014 who still paper file Form 1040.<\/p>\n\n\n\n Tip <\/strong>#2<\/p>\n\n\n\n Consider paying the IRS during the tax year your best estimate of what you will likely owe so has to avoid having to wait for a refund. Last year the vast majority of taxpayers \u2014 about 77 percent \u2014 received refunds. Since returns are processed in the order in which they were received, it means that 2022 returns showing a refund will be placed at the end of the line until the prior years’ refunds claims are processed. <\/p>\n\n\n\n Tip <\/strong>#3<\/p>\n\n\n\n Stop paying the IRS by check. Using one of the IRS’s online payment options, such as the EFTPS<\/strong><\/a> system we have recommended on several occasions. <\/p>\n\n\n\n <\/p>\n\n\n\n If you would like to discuss your business or personal tax planning<\/a>, tax preparation<\/a> and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601<\/a> today to make an appointment at our Exton PA CPA office<\/a> to discuss your situation. You can also schedule a consultation at Click Here<\/a>. <\/p>\n\n\n\n Copyright \u00a9 2022 Keystone Financial Solutions, Inc. All rights reserved. <\/strong><\/p>\n\n\n\n BE SURE TO READ THE DISCLAIMER PAGE: Tax laws, IRS rules and regulations change frequently<\/strong>. Although we hope you’ll find this information helpful, this blog is for educational purposes only and should not be considered as the rendering of tax, legal or investment advice. The publisher shall not assume liability for any losses, injuries, or damages from the display or use of this information.<\/strong><\/p>\n\n\n\n About F. Bryan Haarlander, EA, CTRS:<\/strong><\/p>\n\n\n\n Bryan\nHaarlander is an IRS licensed Enrolled Agent and who owns and operates a\nspecialized tax services firm serving clients in the western suburbs of\nPhiladelphia, PA, which includes the cities of Chester Springs, Coatesville,\nCollegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia,\nPhoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks,\nChester, Delaware, Montgomery and\nPhiladelphia Counties, as well as clients in Delaware, New Jersey, New York and\nthroughout the continental USA. <\/p>\n\n\n\n
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