 Internal Revenue Service IRS Tax News, National Taxpayer Advocate Issues Media Report to Congress expresses concern about continued refund delays in poor taxpayer service. What? How could that be? After the IRS added those two brand new telephone bot options that we talked about just a week ago or so, I thought surely that would solve the problem. In any case, first an attempt at a joke. PropGun2 seems popular these days and I'll tell you what, I've got the need, the need for speed. What's that? Hunter Biden can hook me up with some speed? What? Not that kind of speed you derelict? Man, you're running with the wrong crowd. I don't want to see you going within a hundred feet of that White House again. They're bad influence. Dang, neighborhoods falling apart. The whole world's going to hell in a two bottom breaded hamburger bun. It's just ridiculous. Okay, we're back. What's that Phil? No, no, I'm not going to apologize for my outburst. I don't care if you are the producer. I don't. I are 2022-129 June 22nd, 2022 Washington National Taxpayer Advocate Aaron M. Collins today released her statutorily mandated mid-year report to Congress. There's a link to that here. The report expresses concern about continuing delays in the processing of paper file tax returns and the consequent impact on taxpayer refunds. At the end of May, the agency had a backlog of 21.3 million unprocessed paper tax returns and increase of 1.3 million over the same time last year. Quote, the IRS has said it is aiming to crush the backlog inventory this year and I hope it succeeds in quote Collins wrote quote unfortunately at this point the backlog is still crushing the IRS, its employees and most importantly the taxpayers. You go you get them taxpayer advocate Collins as such the agency is continuing to explore additional processing strategies in quote the report points out that the significant majority of individual taxpayers receive refunds quote at the end of the day a typical taxpayer cares most about receiving his or her refund timely in quote Collins wrote quote particularly for lower income taxpayers who received earned income tax credit benefits tax refunds may constitute a significant percentage of their household incomes for the year. Thus, these processing delays are creating unprecedented financial difficulties for millions of taxpayers and outright hardship for many in quote among business taxpayers many have been waiting extended periods to receive employee tax retention credits for which they are eligible in addition to their regular refunds. He taxpayer challenges this year have included return processing delays, correspondence processing delays and difficulty reaching the IRS by phone, but they do have those like two new telephone bot options at least addressing that one. So backlog of unprocessed paper tax returns more than 90% of individual income taxpayers e file their returns yet last year about 17 million taxpayers filed their returns on paper. So obviously they're trying to push everybody to the filing electronically but a significant amount of people still pile file with the paper returns for various reasons. Some choose to file on paper. Some have no choice because they encounter e filing barriers such as when they are required to file a tax return or schedule the IRS cannot accept electronically. So while the IRS has most of the stuff kind of set up to receive electronically you might have some forms or some communications with the tax return that you can't basically attack on very easily to the actual e file tax return and therefore you might be required to file in some cases or think it would be more beneficial to do so in those circumstances. Before the pandemic the IRS typically delivered refunds to paper filers within four to six weeks over the past year refund delays on paper filed returns have generally exceeded six months with delays of 10 months or more common for many taxpayers. The report says the IRS has failed to make progress in eliminating paper backlog because quote its piece of processing paper tax returns has not kept up with new receipts. So obviously their output hasn't kept up with the input here end quote during the month of May the IRS processed an average of about 205,000 individual income tax returns from 1040 per week. Its form 1040 backlog at the end of May stood at 8.2 million with millions more paper tax returns not yet classified or expected to arrive before the extended filing deadline of October 15th. The report says the IRS would have to process well over 500,000 forms 1040 per week more than double its current pace to eliminate the backlog this year quote the math is daunting in quote the report says so while they're basically saying hey we're putting people on overtime and this and that if you look at the numbers they're basically saying they're quite backed up and it's and you know it's if you just look at it realistically it might take some time that's my interpretation to really dig into the backlog it seems to me. So forms 1040 are just one component of the paper tax return processing backlog millions of of business tax returns and amended tax returns both individual and business are also filed on paper the overall backlog has increased by 7% over the past year as shown in figure one figure one status of unprocessed paper returns comparing weeks ending May 22 2021 May 27 2022 so we got the paper returns awaiting processing you've got the original individual business not specified and the total here for 2021 the total was 16 million 8 for the original amended 3 million 2 total paper returns awaiting processing seen 20 million and in 2022 it's going up to 21 million 300 so obviously significant significant increase to to basically be dealing with with the same resources or if you're doing the same kind of processes in place so you would think something might have to change if that kind of those kind of numbers continue the IRS has publicly committed to reducing its paper tax return backlog to a quote healthy end quote level by the end of the year but it has not provided a definition of quote healthy end quote and this is a typical kind of trend that has always been political language but it seems like it's gotten to an extreme these days with this completely vague language or actually time trying to deconstruct language so we can't even communicate in the same using the same words which is kind of ridiculous so whenever they give you some vague thing like ah we've we've added a few new you know telephone options that's going to reduce the tax returns well how much is it going to reduce it what's the thing going to do how is it going to reduce it we've we've added some overtime hours okay well what exactly is the overtime expected to basically do in terms of the output and so on you got to kind of try to nail people down which is difficult when everybody's trying to deconstruct even every other word you say but in any case quote historically the IRS has paid refunds resulting from paper filed returns within four to six weeks uh end quote Collins wrote quote from a paper perspective returning to a four to six week refund delivery period is a reasonable definition of healthy end quote so if you can get back to the turnaround time being where it used to be uh two to six weeks she would be happy with that Collins that that seems reasonable to me largely because of the likelihood the the IRS will carry a large inventory of unprecedented paper tax returns into the 2023 filing season so obviously the problem will compound if if you continue this backlog back into the next filing season where you're going to get swamped with a bunch of new tax returns right and that's just going to increase the problem so Collins issued a taxpayer advocate directive a TAD in March directing the IRS to implement 2d uh barcoding or other scanning technology to automate the trans the transcription of paper tax returns quote today the digits on every paper return must be manually keystroke into IRS systems by an employee end quote Collins wrote that seems very outdated but I don't know quote in the year 2022 that doesn't seem that just seems crazy it sure does uh it is crazy quote the IRS response to the TAD is due on June 27 2022 the report credits the IRS with taken recent steps to address the backlog but notes quote missed opportunities in quote to have acted earlier quote the IRS paper processing delays were evident more than a year ago and the IRS could have addressed them more aggressively at that time and quote Collins wrote you get them Collins quote uh had the IRS taken steps a year ago to resign current employees to processing functions it could have reduced the inventory backlog carried into this filing season and and accelerated the payment of refunds to millions of taxpayers had the IRS implemented 2d uh barcoding optical character recognition or similar technology in time for the 2022 filing season it could have reduced the need for employees to engage in the highly manual task of transcribing paper tax returns that does seem highly manual and ridiculous have the IRS quickly used some of the 1.5 billion dollars of additional funds provided by the American Rescue Plan Act of 2021 the ARPA which was enacted 15 months ago to hire an Australian additional employees it could have worked through the backlog uh answered more taxpayer telephone calls and otherwise improved taxpayer service end quote so I'm not sure exactly what I know there's been a lot of changes on the on the iris side of things in terms of the law but clearly just throwing money at stuff we we know pretty clearly that's not the answer because you could throw money at stuff all day long and it could be just as crappy that's it was before it got out someone that's actually gonna you know line up the money and again they've done some things that are better that looks like they're trying to improve stuff but the efficiency I don't know uh obviously government organizations are not known for being efficient but it seems uh it seems like it could get better I would think so go Collins so at the end of May 2021 the IRS had an additional 15.8 million returns that had been suspended during processing and required manual review by irs employees the suspended returns consisted largely of e-filed returns on which taxpayers claimed recovery rebate credit amounts that differed from the allowable amounts shown on the irs records so now you've got this new issue and of course that was going to cause a problem we all knew it was going to cause a problem because you've got this uh this kind of advanced payment type of thing which is an estimate and so there's something's not going to tie up to the tax return and from time to time or quite often I would think uh in terms of these big numbers so that you know that's going to cause a problem as of May 2022 the irs had reduced the number of suspended returns to 5.4 million the report credits the irs with developing procedures to reduce delays among suspended returns in part by automating the review process however e-filed returns suspended during processing did not generally result in extended refund delays uh and by contrast unprocessed paper filed tax returns have resulted in refund delays of six to ten months or longer so we got the correspondence processing delays when the taxpayer receives a notice and is requested to respond or chooses to respond the taxpayer must generally do so by mail so the iris is a slow kind of snail mail bureaucratic organization they give you a notice they tell you to respond 30 to 60 days and so on so through May 2021 the irs processed 5 million taxpayer responses to proposed adjustments it took an average of 251 days to do so more than eight months that is more than triple the processing time of 74 days in fiscal year 2019 the most recent pre-pandemic year quote when a math error or similar notice is generated in connection with a paper file tax return in quote the report says quote the combination the return processing delays and the correspondence uh processing delays may mean that the taxpayer must wait well over a year to get the issue resolved and receive the refund due end quote so obviously when you're talking about like a correspondence usually the correspondence oftentimes it might just be a mundane thing like oh you had a math error or something like that and we corrected it on our side here's the correction do you agree with the correction they have to get your ascent of course to the correction in order to move forward and apply that correction and if you're going through snail mail and there's a lag between processing the return because of the error a lag between sending out of the letter and then a lag between receiving or processing the receipt of the letter then obviously a pretty routine kind of process that could have been caught by basically the computer just matching up you know like a like a w2 to what you reported on the w2 or something is now being delayed you know more excessively than you would think and that of course will hurt people if they're waiting for a refund so there are currently over 336,000 taxpayers who could not file their returns or receive their refund because identity thieves had already filed a return using their identifying information so these taxpayers must submit affidavits and other documentation to substantiate their identities they now generally must wait at least a year to receive their refunds the irs website states due to ex extenuating circumstances caused by the pandemic our identity theft inventories have increased and on average it is taking about 360 days to resolve identity theft issues again we knew that was going to be a problem you could have predicted that like a mile before because they started spewing out money out out so that means people are going to be filing more fraudulent returns stealing people's identity becoming more valuable so this stuff although it's a big increase that a lot of it you probably could have predicted and you know they probably couldn't have had the same processing times they had before the pandemic but you know it's pretty clear that when you put these in place they're going to have some of these problems can be seen you know when you put it in place but telephone challenges during the 2022 filing season the irs received about 73 million telephone calls so here we go with the telephone but the bots we've got the bots only only one out of ten calls reached an irs employee compared with the 2021 filing season irs employees answered less than half as many calls but the percentage of calls answered remained about the same because they also received less than half as many calls so the time the average taxpayer spent waiting on hold roads from 20 minutes to 29 minutes a comparison of telephone service during the 2021 and 2022 filing season is shown in figure two figure two irs enterprise telephone results comparing week and may 21st 2021 in april 23 2022 so we've got the filing season 21 22 calls received so we got 167 million in 21 73 and 22 number of calls answered by an irs employee 15 15.7 million versus 7.5 percentage of calls answered by an irs employee 9 and 10 but both of these years are within the pandemic years i believe and and so so so you would think you would want to compare possibly to 2019 i would think but in any case quote the combination of more than 21 million unprocessed paper tax returns more than 14 million math error notices eight month backlogs and processing taxpayer correspondence and extraordinary difficulty reaching the irs by phone made this filing season particularly challenging in quote collins wrote tas objective for fiscal year 2023 as required by law the advocates report identifies tas's key objectives for the upcoming fiscal year the report describes 14 systematic advocacy objectives six case advocacy and other business objectives and three research objectives in light of the challenges taxpayers have been facing over the last two years collins wrote the tac will be placing heavy emphasis on working with the irs to improve the processing of tax returns and taxpayer service generally among the objectives report identifies are the following automating the processing paper tax returns on march 29th as noted above collins issued a report advocate directive that's the tad directing the irs to implement scanning technology by the start of the 2023 filing season so that paper tax returns can be machine read and employees will not have to keystroke each digit on the return into irs systems that would be great they think that save a lot of time after obtaining an extension for responding the irs answered answer to the tad now now due on monday june 27 irs leaders have identified they are not likely to implement 2d bar coding because collins has strongly urged them to implement a plan to achieve automation of paper processing in time for the next filing season quote doing so is critical in quote collins wrote quote it is unacceptable that the agency is still paying thousands of employees to keystroke the data from millions of tax returns digit by digit into irs systems creating current processing backlog and producing an error rate and transcribing individual returns last year of 22% in quote so reducing barriers to e filing tax returns some taxpayers still prefer to file paper returns however many paper filers uh perhaps uh perhaps the majority would prefer to e file the returns but are not able to do so so you could say well why do we have all these paper returns when they're trying to e file some of them just might want to file a fake paper return so so be it but others might be restricted in some way to have the e filing so if you can remove the restrictions that would save up time so among the barriers some taxpayers must file irs forms or schedules that the irs does not accept through its e file system some taxpayers must must include attachments appraisals or disclosure statements that cannot be filed by their tax software packages some software packages block returns from e file if the taxpayer overrides certain entries irs systems reject certain returns during e file process and require affected taxpayers to mail their returns instead and some taxpayers live in areas of the country without broadband internet access or lack computer access and thus face greater difficulty in preparing and e filing their returns the report says the irs must reduce e filing barriers so that more taxpayers can e file and there will be fewer paper tax returns to tens transcribe or scan improving the irs hiring and training process in fiscal year 2022 congress increased the irs's overall budget by almost six percent and the taxpayer services report of the budget by nearly nine percent many of the irs challenges stem from inadequate staffing including limited staffing of submission processing and telephone call centers the report says that hiring and adequately training new employees will enhance the taxpayer experience improving telephone service some taxpayers issues issue may be resolved through technology channels and enhancing those channels must be a priority but some issues are best resolved through a conversation and some taxpayers are not comfortable with the technology the report says it is critical that taxpayers be able to reach the irs by phone as discussed above irs employees were only able to answer 10 percent of taxpayer telephone calls this filing season quote if a private company failed to answer nine out of 10 customer calls customers would go go elsewhere in quote callings wrote so obviously when you compare something like a government entity to a private entity it's usually just ridiculous right because the government entity is usually not going to be up to the standard of the private industry because the private industry has the market pressure so it's kind of harder in a lot of cases to run something in a not-for-profit or in a government entity because the bloating of it is is more prevalent because you don't have that same kind of market pressure which is why you know we we as the people that are using the not-for-profit and the government need to recognize this and and act accordingly put the pressure on accordingly and try to try to minimize the need for non-market pressure non-market-based things that tend to get bloated but anyways quote that of course is not an option for us taxpayers so it is critical that the irs increase staffing in its telephone call center to handle the volume of calls it receives irs responses to national taxpayer advocate administration recommendation the national taxpayer advocate is required by statute to submit year-end report to congress that among other things makes administrative recommendations to resolve taxpayer problems section 7803c3 of internal revenue code authorizes the national taxpayer advocate to submit administrative recommendations to the commissioner and requires the irs to respond within three months under this authority the national taxpayer advocate annually transmits to the commissioner all administrative recommendations processed in her year-end report for response the national taxpayer advocate made 88 administrative recommendations in her 2021 year-end report and then submitted them to the commission for response the irs had agreed to implement 61 or 69 percent of the recommendations in full or in part the irs responses are published on the tas website at national taxpayer advocates annual report to congress tracker you could check that out there's a link to it the national taxpayer advocate is required by statute to submit two annual reports to the house committee on ways and means and the senate committee on finance the statute requires these reports to be submitted directly to the committees without any prior review or comment from the commissioner of internal revenue the secretary of the treasury the irs oversight board any other officer or employee of the department of the treasury or the office of management and budget the first report must identify the objectives of the office of the taxpayer advocate for the fiscal year beginning in that calendar year the second report must include a discussion of the 10 most serious problems encountered by taxpayers identify the 10 tax issues most frequently litigated in the courts and make administrative and legislative recommendations to resolve taxpayer problems the national taxpayer advocate blogs about key issues in tax administration you can visit tas subscriptions there's a link to that here to subscribe past blogs from the national taxpayer advocate can be found at most recent in ta blogs there's a link to that from media inquiries please contact tas media relations at and there's an email address and there's a phone number there'll be a link to this so you can check that out if you want to by going to that at the bottom here about the taxpayer advocate service the taxpayer advocate service the tas is an independent organization within the irs that helps taxpayers and protects taxpayer rights the local taxpayer advocates number is in local directories and at contact us there's a link to that here taxpayers can also call tas toll free there's a telephone number that will be at the link if you want to go to that tas 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 proceed or a procedure isn't working as it should this service is free uh were your voice so there's a link to that here at the irs uh has more information about tas and taxpayer rights under the taxpayer bill of rights so get uh updates to tax topics at you got the facebook link twitter and youtube so you got links to all this stuff and the contact information and that that report is kind of an interesting report to look at because it is someone that's hopefully you know got an independent kind of perspective and is looking at and concentrating in on the processing and working of the irs giving recommendations basically for uh improvement so it is an interesting report if you want to dive into it in more detail there's links to that stuff here there'll be a link to this in the description