IRS ‘Buried’ in Paper Returns Ahead of Difficult Tax Season

Bloomberg Tax, a comprehensive tax research firm, shares in one of their most recent articles that taxpayers and tax professionals face the most challenging filing season ever, as the IRS wrestles institutional obstacles and taxpayers navigate new complexities.

Bloomberg quoted National Taxpayer Advocate Erin Collins from her annual report to Congress stating, “Major problems the IRS and taxpayers are likely to run into as the filing season opens Jan. 24: from a mountain of paper backlogs, fewer workers to answer phones, and lower resources to quickly resolve issues to, complications with pandemic-relief programs such as the advance child tax credit payments and stimulus checks.”

Those issues make this year’s filing season the most challenging taxpayers and tax professionals have ever experienced. As of late December, the IRS had a paper backlog of 10.3 million unprocessed returns, and about 5 million pieces of taxpayer correspondence that date back to at least April, the report said.

Collins also said the agency performed well in 2021 under its extraordinary circumstances of increases in the number of taxpayers, several pandemic-relief provisions that had to be implemented quickly, and a lower budget. Each financial relief program “consumed considerable IRS resources to administer,” including overall planning, IT programming, implementation, public communications, and responding to taxpayers’ questions and account issues. The IRS had to reallocate personnel and other resources from its main tax-collection activities.

For taxpayers, the number of returns suspended and requiring manual processing is likely to be high again in 2022. Congress advance child tax credit payments and stimulus checks may result in additional discrepancies between amounts claimed on tax returns and in IRS records, Collins said.

Both relief provisions will have to be claimed and/or reconciled on 2021 individual tax returns. While the IRS is attempting to minimize discrepancies by sending notices to taxpayers who received payments, Collins expects “millions of discrepancies” and math error notices.

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