 Internal Revenue Service R.R.S. Tax News National Taxpayer Advocate delivers 2022 annual report to Congress focuses on taxpayer impact of processing and refund delays. So they want to know the impact of processing and refund delays on taxpayers. I mean I can tell you the impact on this taxpayer, they pissed me off. Now honest, this is what I'm talking about the out of control government spending. I mean it shouldn't take a whole panel of bureaucrats to realize refund delays will piss people off. I mean they could just ask like any random dude, dude at or dude ex, the gender neutral dude term on the street and they could get the answer that's all they have to do. I mean if they had any kind of actual empathy rather than the slimy self-interested manipulative kind of stuff they pass off for empathy they wouldn't even need to ask the question. I mean the answer is self-evident to anyone with the slightest bit of social intelligence. Presumably individuals working at the government also pay taxes. So they could just take a minute to ask themselves what their own reaction would be and I'm pretty sure they'd get the right answer or possibly another alternative. Maybe they could just think about the IRS's reaction when you pay your taxes to them late. And for those who've never done that and you're not aware of the IRS's reaction when you pay your taxes late the IRS gets pissed off. I mean it's a very predictable reaction you know like know thyself isn't that what some super smart ancient Greek dude said one time. But when the bureaucracy gets too large the only thing we start to know is how to tie everything and everyone up in red tape. Actually they have been buying a lot more rainbow color tape in place of red tape these days but still being tied up is being tied up no matter the color of the tape that they're using at the at the moment that's what I'm talking about power to the people down with the tape whatever color down with the tape. Vogue on poetry is widely accepted as the third worst in the universe. The second worst is that of the Asgoths of Creea during a recitation by their poet master Grunthos the flatulent of his poem owed to a small lump of green putty I found in my armpit one midsummer morning four of his audience died of internal hemorrhaging. IR 2023-04 January 11 2023 Washington National Taxpayer Advocate Aaron M. Collins today released her 2022 annual report to Congress there's a link to that here saying taxpayers and tax professionals quote experience more misery in 2022 end quote due to paper process delays and poor customer service. But the report also says the internal revenue service made considerable progress and reducing the volume on unprocessed tax returns and correspondence and is poised to start the 2023 filing season in a stronger position. So obviously it's been a strange couple of years with the whole pandemic thing and a lot of the responses to the pandemic have been changes to laws with relation to the IRS the IRS in part executing many of those changes and then we have the social distancing types of rules which were tried to put in from a top down kind of situation. So you would think the IRS being more impacted by them in a negative way than possibly other kinds of institutions. And so that of course is going to lead to a buildup of things that would would be caused especially for things that have to be processed within say an office like the paper filed tax returns and then I believe they hired a bunch more they got a lot more funding in order to hire more people to get into the backlog which was caused due to the response to the COVID and the social distancing rules. But now I think a lot of that money has been removed again now that there's been a change in Congress and more hawkishness on the spending but they already hired all the people. So we'll see we'll see what happens is kind of an interesting interesting dynamics going on these days. So the advocates report assessed assesses taxpayer service during 2022 identifies the 10 most serious problems taxpayers are experiencing and they're dealing with the IRS and make administrative and legislative recommendations to address those problems. This year report recommends specific initiatives that Collins is urging the IRS to include in its plan showing how the additional funding is received in the Inflation Reduction Act will be spent. So once again you've got this Inflation Reduction Act which seems to me like a very deceptively named bill which in part included funding to the IRS which is that going to reduce inflation I don't know I'd like to see the argument for it whenever they say it but they don't give the argument. I know how it has anything to do with inflation but whatever that's probably they're going to try to cut back on the spending now that there's been a change in the dynamics of Congress being more conservative at this point in time so we'll see what impacts that have on the IRS going forward as well. So it also contains two research studies one on ways to structure the earned income tax credit to increase participation among eligible taxpayers while reducing improper payments and the other designed to help the IRS improve its online operations by studying the functionality of online operations offered by over 40 states in several foreign countries. So taxpayer service challenges you got the return processing and refund delays obviously that's going to be one of the big ones if they're not getting through and processing the returns that's one of their biggest you know jobs if they have a backup like they had before in the paper process returns that's obviously an issue. So for most taxpayers the most important function the IRS performs each year is issuing timely tax refunds in 2022 about two-thirds of individual taxpayers were entitled to refunds and the average refund amount was nearly $3,200 you got to be careful with those average refund amounts because there are very there's a wide dispersion of data points so but any case average $3,200 the report says the IRS failed to meet its responsibility to pay timely refunds to millions of taxpayers for the third year in a row about 13 million individual taxpayers filed paper returns because of paper processing delays refunds for these taxpayers were delayed generally by six months or longer millions of e-filed individual returns were quote suspended in quote because they tripped IRS processing filters and required manual review by IRS employees before refunds could be released so again because the IRS tried to stop down kind of social distancing type of thing I'm not sure and this is where the issue comes in with the funding I'm not sure it's a funding problem that the IRS really had I'm very skeptical of that I'm any kind of spending I'm somewhat skeptical these days I think what happened is there's a lot of changes to the tax law that were unexpected and then they applied social distancing rules in a way that was somewhat extreme which of course led to a buildup of stuff that needed to be done within an office kind of situation now that stuff is over and they're saying that the backlog is because of too little money and they want more money right well no now you just get back in the office I would but you know I don't have it I don't have an in-depth look on the situation but you would think that any guess hundreds of thousands of business returns claiming the employee retention tax credit were delayed however the report says the IRS will be starting that the 2023 filing season in much better shape than the last two years the IRS began 2022 with an unprocessed unprocessed paper backlog of 4.7 million original individual returns form 1040 3.2 million original business returns and 3.6 million amended returns individual and business combined when the advocates report went to press in mid December 2022 the IRS had reduced those backlogs to 1 million original individual returns 1.5 million original business returns the first one 1 million original individual returns 1.5 million original business returns and 1.5 million amended returns by December 23rd the IRS had further reduced its processing paper backlog of original individual returns to about 400,000 and original business returns to about 1 million this significant reduction in the paper return inventory will enable the IRS to begin processing paper filed tax year 2022 returns during the upcoming filing season so obviously they got to get things lined up right by now because we're going into the busy time for them with tax filing season around the corner that contrast with the previous two years when the IRS was not able to process current year returns until months after the filing season had ended and what did that do it pissed people off of course the number of returns suspended during a processing is the only significant return category in which inventories increased the IRS entered 2022 with an inventory of 4.2 million suspended returns the inventory grew to 5.9 million suspended returns by mid December cases involving suspected identity theft account for about half the inventory of suspended returns in mid December the IRS reported 2.9 million identity theft cases in its inventory that's a lot well it seems like a lot to me it's hard to know what these numbers are so large but seems like a lot of identity theft while some will turn out to be fraudulent claims the IRS website as of January 9th January 9 states due to extenuating circumstances caused by the pandemic our identity theft inventories have increased and an average it is taking about 360 days to resolve identity theft cases in quote the report calls a year-long delay quote unacceptable in quote and are and urges the IRS to assign additional employees to process these cases so this is where again it's kind of do they need more money do they need more employees or they do they just need to get back to normal and deal with the fact that basically they were kind of parts of the iris were kind of shut down for various reasons for the last couple years so delays in processing taxpayer correspondence in other cases in the accounts management function so the IRS sent millions of notices to taxpayers during 2022 these include 17 million math error notices so those are the ones you get when you got a math error on your return they try to collect it automated under under reporter notices were an amount reported on the tax return did not match corresponding amount reported to the IRS on form 1099 or other information reporting forms notices requesting a taxpayer authenticate identity where IRS filters flagged a return as potentially fraudulent correspondence examination notices and some collection notices notices that often require written taxpayer responses if the IRS did not process a taxpayer response it may have taken adverse action against the taxpayer or not release the refund claimed on the tax return during fiscal year 2022 it took the IRS an average of 193 days to process taxpayer responses to proposed tax adjustments about six months that compares with 89 days in the fiscal year 2019 the most recent pre-pandemic year the report also calls the delays in resolving these cases unacceptable this is unacceptable I'll tell you what I say that all the time no one changes anything round here I swear but whatever it's unacceptable dang it difficulty reaching the IRS on its toll-free telephone lines the IRS received 173 million calls during fiscal year 2022 only 22 million 13 percent or roughly one out of eight calls got through to the IRS employee that pisses people off to you you're on hold all the time at least you can get a decent like automatic response machine telling you yeah it's gonna take you a month before we get back to you or something you know we're just not gonna talk to you just tell me don't put me on hold anyways as a result most callers could not get answers to their tax law questions receive help with their account problems or speak with an employee about compliance notices those who got through waited an average of 29 minutes on hold before the call began I call myself lucky if I get through in 29 minutes for anyway telephone service for tax professionals was worse than the prior year and hit an all-time low because tax professionals prepare the majority of tax returns and often call with complex account specific questions the IRS has established a practitioner priorities service the PPS telephone line to handle their calls it still causes problems that one but in fiscal year 2022 IRS employees answered only 16 percent of PPS calls that's ridiculous this is the taxpayer priority we have priority we're the very important people the VIPs for crying out loud whatever however fewer than one out of six that's ridiculous it's like playing Russian roulette with the phone so and the average hold time for those who got through was 25 minutes telephone delays place tax professionals in the difficult position of billing clients for the time spent trying to reach the IRS or writing off that time that's right it sure does make a terrible position quote tax professionals are key to successful tax administration in quote Collins wrote they sure are you tell them you tell them Collins get the tax hotline fixed what's going on over there that's where I draw the line quote the challenges of the past three filing seasons have pushed tax professionals to their limits raising client doubts and their abilities and creating a loss of trust in the system my trust is pretty darn low dang it I'll tell you that I don't even did I stop calling the hotline for crying out loud fix the hotline okay outlook for 2023 and the reports preface Collins predicted the taxpayer service will improve in 2020 well kick it can't get much worse I'll tell you that quote we have begun to see the light at the end of the tunnel in quotes she wrote quote I am just I'm just not sure how much further we have to travel before we see sunlight in quote the report cites three reasons for optimism all right I need some optimism reasons number one the IRS has largely worked through its backlog of unprocessed tax returns even though it remains challenged with a high volume of suspended returns and correspondence number two Congress has provided the IRS with significant additional funding to increase its customer service staffing so I think there's I think they're gonna try to pull back on that now but they already got the money it's probably whatever number three with the benefit of a direct hire authority the IRS has recently hired 4,000 new customer service representatives and it is seeking to hire 700 additional employees to provide in-person help in its taxpayer assistance centers so again I'm skeptical of all the new people but you know because I still think it happened because of the whole pandemic thing and cutting back and whatnot I'm not sure but in any case whatever direct hire authority has enabled the IRS to reduce the number of days from the time it posts an announcement announcement on USAjobs.gov until it on boards a new employee by more than half but Collins warned the improvements will not be immediate quote staff increases come with growing pains end quote she wrote quote as new employees are added they must be trained for most jobs the IRS does not maintain a separate cadre of instructors instead experienced employees must be pulled off the regular caseload to provide the initial training and act as the on-job instructor in the short run that may mean that fewer employees are assisting taxpayers particularly experienced employees who are likely to be the most effective trainers that's quote that's great so you're gonna get through you're gonna be able to talk to someone but they won't know anything that's typical that's typical so she also pointed out that until additional fully trained employees are on board taxpayers service will continue to be a zero-sum game for example customer service representatives and the accounts management function split their time between answering the phone and processing taxpayer correspondence if the IRS assigns more employees to answer the phones correspondence processing will be slower if the IRS assigns more employees to process these correspondence phone services will decline it sounds like she wants more it sounds like they're asking for more money to me right here no more money dang it no more quote the IRS will have to perform a difficult balancing act with its current resources and will need to ensure it does not create a new paper backlog in 2023 by resigning too many account management employees from processing case inventories to answer the phone and quote Colin said such an issue I'm not I quote the IRS needs to end the various cycle of paper backlogs as employees are trained and report further duty I expect we will start to see improvements in service probably by the middle of 2023 and quote taxpayer advocates service administration recommendations to the IRS in August 2022 Congress enacted the Inflation Reduction Act which was a ridiculous act that we've been reading about for quite some time now I guess since August and it has nothing to do with inflation as far as I can tell which is I feel like I've been deceived once again it's been a multiple times of deceptiveness these are decepticons I'm telling you any case which provided the IRS with funding of nearly $80 billion over the next 10 years to supplements its annual appropriations while the funding earmarked for tax law enforcement has been controversial the legislation included supplemental funding of $3.2 billion for taxpayer services including pre-filing assistance and education filing and account services and taxpayer advocacy services for point eight billion dollars to enable the IRS to continue modernizing its information technology IT system including advancement of customer callback and other technology to provide a more personalized customer experience and 25.3 billion dollars to support taxpayer service and other operations the report said that this additional funding could be a game changer for taxpayers and tax professionals yeah it basically bankrupt us I feel like I'm a little skeptical that it's going to improve things I want us there needs to be some more efficiency going on around here I feel anyways quote if spent wisely this funding will give IRS management if there's there's the key term there's the key term if spent wisely I have that's where my skepticism is that this funding will give IRS management the tools it needs to bring us tax administration into the 21st century by enabling it to hire and train workforce of the future replace antiquated IT systems and generally revamp the taxpayer experience based on principles of fair and oh no she's using the equitable term that term is I've never heard that term before like three weeks ago equitable it's equitable that you're making up when you make up new words that I don't know what they mean I get suspicious that something funny is going on here use words that made to have a definition for okay okay here we go I'm calm and in August in and August 17th 2020 to memorandum the secretary of the Treasury directed the IRS commissioner to to produce an operational place within six months that details how the additional IRA funding will be spent so in the reports preface and in discussing the 10 most serious taxpayer problems Collins recommends numerous initiatives for inclusion in the plan including the following number one hire and train more human resource employees to manage hiring all IRS employees so they want more money for hiring people I that's what I'm getting out of this the report says that staffing shortages in the IRS is human capital office HCO are ironically one of the biggest obstacles to hiring and onboarding more employees HCO it's like water except without the H2O HCO HCO which coordinates all IRS hiring does not have enough staff to review and approve new position descriptions post job announcements and screen incoming applications and can become a bottleneck without HCO involvement other IRS divisions cannot hire employees even when they have funding TAS recommends the IRS use some of its IRA funding to quickly bolster its HCO staff and in the interim provide creative alternatives so they're going to get creative over there they are including enabling the business units to do their own hiring so new employees can be selected while also working to expedite security checks and the onboarding of new employees number two ensure all in IRS employees particularly customer facing employees are well trained to do their jobs from a taxpayer perspective getting through to a live IRS telephone a sister or have taxpayer correspondence process quickly are important the report says but it is even more important that the responding IRS employee have enough knowledge to handle the question or issue properly the combination of budget cuts beginning in fiscal year 2011 and continuing until the latest last few years and the COVID-19 pandemic has limited the IRS's ability to provide adequate training to new employees and to provide regular updates and refresher training to a existing workforce they want more money I'm feeling like there's a theme here quote training must go hand in hand with hiring and it must continue throughout employees career with the IRS with a continuing focus on taxpayer rights in quote the report says quote doing work incorrectly can be worse than not doing it at all in quotes so we need more money number three create robust and accessible online accounts with functionality comparable to that of private financial institutions and through which taxpayers and practitioners can access download and upload material information so you know why the private institutions did that and created that because they did because they were trying to cut back on all the money they're spending on on employees that's what drove them to kind of do that I would I would assume but in any case if all the steps the IRS can take to improve the taxpayer experience the report says they're creating robust online accounts should be the highest priority and will be the most transformational most Americans have been conducting business with financial institutions digitally for two decades or more that's right that's right the IRS is a little bit behind on this one paying bills transferring funds depositing checks applying for loans trading stocks and mutual funds etc tas recommends that the IRS prioritized developing online accounts with comparable functionality without facial recognition or anything like you were trying to do for a while that was ridiculous it's like I don't I don't like their Facebook over here trying to take all my data sell it to China or something whatever the ability to file tax returns make payments view transactions receive or view tax adjustments or other notices respond to tax adjustments or other notices upload and download documents and submit questions or live chat with an IRS employee would not be cool which often will eliminate the need for visiting calling or sending correspondence yeah get with it on that one IRS and you can get rid of half you wouldn't need to hire all the employees if you got that right number four temporarily expend expand uses of documentation upload tool DUT or similar technology the IRS has made it possible for taxpayers in some circumstances to provide requested information online rather than by snail mail so for example an auditor requesting documentation to support a taxpayer's business deductions or charitable contributions may provide the taxpayer with a link and passcode so the taxpayer can upload the documentation and not have to mail it in eventually this functionality should be rolled into IRS online accounts until that happens tas recommends broader use of the DUT to reduce the burden on taxpayers and allow the IRS to resolve issues more quickly number five improve the readability of tax transcripts the IRS utilizes codes for various transactions and these codes are included on the transcripts provided to taxpayers and their representatives however the codes are incomprehensible to the non tax professional and even tax professionals often struggle to decipher them tas recommends the IRS revamp the presentation of tax transcripts to substitute descriptions for the codes or at least include a glossary on a separate piece of paper that explains in plain language what each code on the transcript means that would be that shouldn't be too hard to have a little key a decipher key that should be pretty number six enable all taxpayers to e-file their tax returns over 90% of individual taxpayers now e-file their income tax returns by compulsion by this point so you would think but the IRS still receives millions of paper tax returns each year about 13 million individual returns and millions of additional business returns last year some taxpayers would prefer to e-file but cannot do so so this can happen if the taxpayer must file a form or schedule that the IRS system are not yet programmed to accept electronically how in the world do they not have it set up at this point if a return is rejected by IRS system for violating a programming rule or if a taxpayer must attach documentation to the return e.g. an appraisal or disclosure and the tax return software and the taxpayer is using does not allow for the transmission of attachments causes problems there are steps the IRS can take to address all three of these limitations it can modernize its e-filing platform to accept all IRS forms and schedules and taxpayers attachments it can accept and review returns that violates some IRS system programming rules otherwise the taxpayers whose return is rejected must file it on paper requiring the IRS transcribe it and if some software packages allow taxpayers to submit attachments and others do not the IRS can post a list of software packages that allow attachments online that way taxpayers with attachments will know which packages they can use to e-file their returns quote if the IRS makes it possible for all taxpayers to e-file their returns quote that the reports says quote the tax the number of paper file returns is likely to drop dramatically in quote so national taxpayer advocate quote purple book in quote legislative recommendations to strengthen taxpayer rights and improve tax administration the national taxpayer advocate two thousand twenty three purple book processes sixty five legislative recommendations for consideration by Congress among them are the following number one amend the the look back period to allow tax refunds for certain taxpayers who who took advantage of the postpone filing deadline due to COVID-19 I won't go through the detail on numbered all these number two authorized the IRS to establish minimum standards for paid tax return preparers number three expand the U.S. tax courts jurisdiction to ad ad adjudicate refund cases and accessible penalties number four modify the requirement that written receipts acknowledging charitable contributions must predate the filing of the tax return number five restructure the earned income tax credit the I.T.C. to make it simpler for taxpayers and reduce improper payments they probably could make that one a little bit easier number six expand the protection of taxpayer rights by strengthening the low income taxpayer clinic that's the L.I.T.C. program other sections in the report the report contains a taxpayer rights assessment that presents performance measures and other relative data a description of T.A.S.'s case advocacy operations during fiscal year two thousand twenty two a summary of key T.A.S. systematic advocacy accomplishments and a discussion of ten federal tax issues most frequently litigated during the preceding year for the second year the section on most litigated tax issues contains an analysis of substantially all cases petitioned in the tax court rather than simply decided cases providing a much broader view of of issues taxpayers bring to court also the second also for the second time the report includes a section title at a glance in quote which provides census summaries of the ten most serious problems it is intended to give readers a quick overview of each issue so they can decide which ones they want to read about in depth please visit the two thousand twenty two national taxpayer advocate annual report to congress there's a link to that here the national advocate blogs about key issues in tax administration so you can visit the T.A.S. subscription page there's a link to that here post blogs from the national taxpayer advocate can be found at most recent N.T.A. blogs there's a link to that here the media inquiries please contact T.A.S. media relations at there's an email I'll put a link to this so you can check it out and there's also a phone number that you can check out about the taxpayer advocate service the taxpayer advocate service the T.A.S. is an independent organization with the IRS that helps taxpayers and protects taxpayer rights the local taxpayer advocates number is in local directories and at contact us page there's a link to that here taxpayers can also call T.A.S. toll free at eight seven seven seven seven seven four seven seven eight I won't say that a hundred times because there'll be a link to this in the description T.A.S. can help those who need assistance in resolving an IRS problem if the problem is causing financial difficulty or those who believe an IRS system or procedure isn't working as it should the services free for more information about T.A.S. and taxpayer rights under the taxpayer bill of rights visit the contact us page there's a link to that here get updates on the tax topics at social media platforms you got Facebook Twitter YouTube links to those more links down below complete report two thousand twenty two annual report to Congress executive summary and you've got the purple book there's links to all that stuff here so you can read on this indefinitely basically and there'll be a link to this in the description