February 21, 2024

The IRS was able to reduce the large number of outstanding tax returns this tax season, but still hasn’t returned to pre-pandemic levels, according to two reports.

The report released Monday by the Treasury Department’s Inspector General for Taxation found that the IRS made significant progress this tax season.in a Report Based on interim results for the 2023 filing season, TIGTA found that the IRS has made significant progress in reducing tax return inventory to near pre-pandemic levels. More than 2 million individual tax returns and transaction inventories remain at the end of 2022, compared to more than 8.4 million at the end of 2021. “This backlog will continue to have a significant impact on the taxpayers involved,” the tax office said. Report.

IRS officials told TIGTA that for the first time since the pandemic began, individual tax return processing and related activities returned to normal timeliness targets. The IRS has until February 4, 2023 to clear its carryover inventory of unprocessed individual tax returns it received during 2022. However, the IRS inventory of rejected, “unmailable” and amended returns continues to build up, the report noted.

The IRS is headquartered in Washington, D.C.
The IRS is headquartered in Washington, D.C.

Natalia Braclawski/Adobe

in another Report, TIGTA found that the IRS needed to take additional action to reduce its account management inventory below pre-pandemic levels. As of December 31, 2022, the IRS reported 6.2 million cases in its account management inventory and 445,000 cases in its Form 1040-X amended tax return inventory. The IRS created a surge team last year to help deal with the backlog as part of last year’s “wellness” program. TIGTA identified a number of factors contributing to the remaining backlog. While additional inventory closures were facilitated by staff assigned to augmented teams in the account management function, fewer staff were available than expected. Additionally, the loss of staff from other IRS functions resulted in an estimated $2.6 billion in lost or delayed potential revenue due to fewer inspection and collection cases being processed. Additionally, the Form 1040-X augmentation team closed at less than half the normal employee close rate.

“Automating the processing of these amended returns would reduce taxpayers’ burden of waiting to process amended returns, and the benefits far outweigh the associated costs,” the report said. “For example, TIGTA estimates that by automatically processing Form 1040-X, the U.S. The IRS could potentially save more than $322.2 million annually in processing costs. That’s on top of any interest savings.”

TIGTA made 13 recommendations to the IRS in its report, including management establishing goals and plans for all inventory types to reach pre-pandemic levels and their prioritization of funding and implementing automated processing of Form 1040-X. The IRS agreed with 10 of the report’s recommendations but disagreed with three, including management developing targets and plans for all inventory types to reach pre-pandemic levels.

“Our efforts have resulted in 23.9 million case closures in FY 2022 and 5.2 million in FY 2023 through December 31, 2022,” said IRS Commissioner Kenneth Corbin, Division of Payroll and Investments, in response. Report. “During the 2023 filing season, our primary focus will be on providing service through toll-free lines; however, we will continue to address inventory issues as resources permit.”

A separate report on midterm filing season statistics also included some statistics on the IRS’s efforts to reduce phone wait times. As of March 4, 2023, taxpayers made a total of 17 million attempts to contact the IRS by calling various customer service toll-free helplines. The IRS reported that 4.4 million calls were answered automatically and 3.5 million calls were answered by phone assistants, providing an 80.6% service level with an average response time of 5 minutes.

Tax-prep firms like H&R Block have noticed an improvement in IRS operations this year after it received an additional capital injection from the Reduce Inflation Act.

“The IRS has had a tough couple of years trying to get all the stimulus relief and COVID credits in place,” said Kathy Pickering, chief tax officer at H&R Block. “They’re really struggling, and that’s because They’ve had to respond so quickly with a really aging technology system and a very limited workforce. The funding they’ve gotten so far, the ability to hire an assistant to answer the phone and catch up on the backlog really helps to see a more normal and stable year Tax season. Looking back we can see how important it is for the IRS to be able to carry out its core mission. If there is a need to increase funding they want them to be able to do things incrementally. Otherwise, it all affects their ability to provide basic The ability to serve taxpayer expectations at the same level, we really don’t want to see that happen.”

However, tax professionals and taxpayers still cannot reach the IRS by phone, whether through the Practitioner Priority Service or regular toll-free numbers.

“It was a very complicated experience,” Pickering said. “What we’re seeing is that the way the IRS reports its service levels is a mix of factors. Are taxpayers able to call the IRS and talk to a real person? The actual experience is definitely better than the IRS How is the overall service level reported and we still see a lot of room for improvement in handling tax practitioner services. That’s where our front line tax experts, when they need to make a call on behalf of the IRS a client, should have been There are priority lines, and they have also experienced long delays and setbacks and been able to get through. The actual service level of the IRS has a lot of room for improvement. At the same time, they have performed much better this year than they have in the past few years.”