The Internal Revenue Service will kick off the approaching tax season with a backlog of at least 10 million unprocessed returns from last year, according to a new report by the national taxpayer advocate.
The pile of returns remaining are from the “most challenging year taxpayers and tax professionals have ever experienced,” the advocate, Erin M. Collins, wrote in her annual report.
Although the backlog is not too different from last season’s, it is a far higher number than the unprocessed returns the I.R.S. typically faced before the pandemic.
One big reason for the pileup, according to the report, is that the federal government charged the I.R.S. with administering various stimulus payments and other programs during the pandemic. That meant the agency, which has had its budget and work force shrink in recent years, had to reallocate a lot of resources to carry out those financial relief programs.
“Paper is the I.R.S.’s kryptonite, and the agency is still buried in it,” Ms. Collins said in a statement, referring to the millions of paper returns that account for most of the backlog. The Office of the Taxpayer Advocate, which Ms. Collins leads, is an independent entity within the I.R.S. that focuses on issues of taxpayer rights and services.
The I.R.S. itself warned taxpayers this week that staffing shortages and backlogs would translate into another frustrating filing season, which begins on Jan. 24 and runs through April 18 (in most states).
In a briefing on Monday, Treasury Department officials highlighted the lack of resources at the I.R.S. and said a lower level of service should be expected — including the time it will take staff to answer phone calls from taxpayers with questions. Treasury officials noted that in the first half of 2021, fewer than 15,000 employees were available to handle more than 240 million calls — one person for every 16,000 calls.
As of late December, the I.R.S. had yet to finish processing six million original tax returns, 2.3 million amended returns, more than two million employer quarterly returns and five million pieces of taxpayer correspondence — with some submissions dating to April and with many taxpayers still waiting for refunds, according to the advocate’s report. In contrast, there are fewer than a million unaddressed returns in a more typical year, according to Treasury officials.
Even millions of returns filed electronically — which usually flow through the system more quickly — were suspended during processing because of discrepancies between the amounts claimed on returns and what the I.R.S. had on record.