Between unprocessed returns, unanswered correspondence and other actions, the IRS has millions of items stacked up on its to-do list — and when the agency tried to hire 5,000 more people for the tax season now underway, fewer than than 200 people applied. Taxpayer Advocate Erin Collins illustrated the depth of the agency's challenge Tuesday before a House committee, just weeks after she submitted a report telling lawmakers.
Americans could have a frustrating filing season with long wait times and being unable to reach the IRS to answer their questions as millions of people look forward to receiving refunds.
Collins said some of the problems seen last year have only grown worse.
"Taxpayer services must improve. And for that to happen, the IRS needs to eliminate the backlog, pay out those delayed refunds, and get current on its work," Collins said. "Americans deserve better."
The massive backlog snowballed during the coronavirus pandemic. According to Collins' submitted statement, the IRS still had 6 million unprocessed original individual returns and 2.3 million unprocessed amended individual returns as of late December. Some taxpayers who submitted returns last April were still waiting on refunds 10 months later. As of early February, there were also 1.5 million unprocessed employer quarterly returns.
For taxpayers, the challenges have led to years of headaches and financial trouble. For Los Angeles small business owner Juliet Huck, it meant having to take out a small business loan to help stay afloat, after the agency failed to promptly send her the $6,000 she was owed from the 2019 tax return.
"I'm completely frustrated that after two years the problem has not been fixed," Huck said. "I'm not sure how the IRS can expect us to pay on time, yet if we don't we get penalized."
Collins said Tuesday the backlog should be the No. 1 priority. Filing a paper return, she said, remains "at the heart of the agency's challenges and processing tax returns." The IRS still has more than 3 million returns that must be scanned, transcribed and processed, she said, referring to paper returns as the agency's "kryptonite." While scanners can be used in some instances within the IRS, Collins explained Tuesday that paper returns must be manually entered into the system.
The IRS moved 1,200 IRS employees with previous experience from other positions through September to help address the inventory. But a recent effort to hire for 5,000 positions to help the agency with tax filing season drew fewer than 200 applicants.
"I do not think we're going to be able to hire enough people to get us out of this hole," Collins said. The agency will also need more than the current 1,200 employees moved to help out, she said, and potentially could outsource work that does not require specific expertise.
In the long-term. automation is another potential solution for some processes, Collins said, but it's difficult to carry out a major IT project and modernize a decades-old system when the funding is delivered through continuing resolutions by Congress. She told lawmakers the agency needs sustained multi-year funding.
Collins said taxpayers who want to help avoid delays should file electronically and avoid paper. Second, they should request direct deposit. Third, triple-check for errors. Collins warned that stimulus payments and advance child tax credit payments could cause additional discrepancies this year – further slowing down processing this tax filing season.
Taxpayers who have questions could find it hard to get answers. Of the more than 282 million calls to customer service representatives last year, only 32 million were answered – 11%.
"Among the 1 in 9 callers who was able to reach an (agent), the IRS reported that hold times averaged 23 minutes," Collins said in her written statement. "The IRS data on hold times excludes taxpayers who waited on hold for extended periods and hung up before a CSR answered their calls. Tax professionals and taxpayers have reported that hold times were often much longer, and frustration and dissatisfaction was high throughout the year with the low level of phone service."
On Tuesday, Collins also said at the height of calls coming in during the tax filing season, the IRS was able to answer as little as 4%.
Some Republicans at Tuesday's hearing argued for incentives to get people back to work – noting people did not apply for the IRS jobs. They laid blame on the Biden administration for incentives for people to stay home Democrats pointed at years of agency funding cuts.
"The IRS was intentionally gutted as part of the former administration's objective with his co-conspirators in the Republican Party, to do everything possible to elevate the fortunes of the wealthy, the well off, and the well-connected and prevent them from paying their fair share," House Democratic Caucus chairman Hakeem Jeffries told CBS News. "That's the bottom line. That's the reality of why we are where we are."
Scott MacFarlane contributed reporting.
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