IRS Backlog Withholds Millions of Tax Returns

Millions of 2021 tax returns filed with the Internal Revenue Service have yet to be completed, and the agency is facing a longer-than-normal backlog at this point in filing season, the Treasury Department said Tuesday.

More than twice as many tax returns are expected to be processed “compared to historical norms at this point in the calendar year,” according to a letter sent to lawmakers by top Treasury and IRS officials.

Most of the backlog is related to paper returns, which take longer to process than those filed electronically. The IRS started this tax season with eight million unprocessed tax returns from the previous year. Because the IRS handles returns in the order they’re received, the agency spent much of this year trying to catch up on older taxes before moving on to current ones.

Treasury and IRS officials have attributed the initial delay to severe resource problems facing the agency, whose budget has been gutted by Republican lawmakers in recent years. Staff shortages and outdated technology have eroded many of its capabilities, a situation made worse in the wake of the pandemic, when the IRS became the main conduit for sending stimulus payments to households.

In a letter to lawmakers, Treasury Deputy Secretary Wally Adeyemo and IRS Commissioner Charles P. Rettig said the agency expected to finish processing all error-free individual tax returns received last year by the end of the year. of the week. with business declarations filed in 2021 completed “shortly after”.

“Despite this progress, there are real challenges ahead,” Adeyemo and Rettig wrote, noting that “because the IRS entered this filing season with a significant delay, millions of paper returns received in 2022 are still They have not been prosecuted.”

The backlog has drawn harsh criticism from Republicans and Democrats, who have demanded answers about why millions of taxpayers have waited months for their federal tax returns and refunds.

The Biden administration has pointed to the agency’s budget as the reason for its problems, saying it needs more money to hire qualified staff and improve its technology.

“The IRS has downsized at a time when its workforce, already reduced to 1970s levels, has been struggling with the personal and family health challenges posed by the pandemic, resulting in fewer employees working at inventory at IRS campuses in the past two years than in any recent period in the agency’s history,” the officials wrote in their letter.

Mr. Biden has called for $80 billion to be invested in the agency over a decade to help crack down on tax cheating, and estimates that would raise $400 billion in tax revenue. Republicans have seized on the IRS’s problems as proof that it shouldn’t be given more money or responsibility, and at least one lawmaker has called for the taxman to be eliminated.

In a call with reporters, a senior Treasury official said the IRS had hired 1,500 new employees and diverted other existing employees to help clear the backlog. But much more work remains to be done. In March, the agency said it intended to hire 10,000 new employees next year and planned to make about half of those hires in the coming months.

Audit fees for millionaires have dropped by 70 percent over the last decade, the official said, while fewer than 20 percent of calls to the IRS are answered.

Treasury’s taxpayer advocate is expected to release a report on Wednesday that further documents the agency’s shortcomings.

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