National taxpayer advocate: 2022 could be ‘Groundhog Day’ for IRS

Rather than clearing a backlog of tax returns by the end of next month as the outgoing commissioner promised earlier this year, the IRS is in danger of being in the same frustrating situation as it was at the end of 2021, the national taxpayer advocate said in a blog post Thursday.

The IRS had its backlog of unprocessed returns down to under 8 million individual and business paper returns as of Oct. 21, National Taxpayer Advocate Erin Collins wrote in the post. That compares to a figure of 7 million for those same types of returns at this point in 2021, she wrote.

"To state the obvious, the 2022 filing season was another frustrating one for taxpayers, tax professionals, and the IRS," Collins wrote, comparing the taxpayer experience with the IRS in 2022 to the movie Groundhog Day because of unfortunate similarities to previous filing seasons.

In March, IRS Commissioner Charles Rettig — whose last day in the position is Saturday — told House members in a hearing that the IRS will process its backlog of unprocessed work — some of it dating to 2020 — by the end of 2022.

When asked whether the backlog would be cleared by December, Rettig responded: "Absolutely before December." He said that barring unforeseen circumstances, the IRS would be "healthy" by the end of 2022 and would start the 2023 filing season with "normal inventories."

The IRS has been processing between 900,000 and 1.1 million total individual and business returns per week in recent weeks, Collins wrote. "Although the IRS has committed to clearing the paper backlog by the end of the year, there is little time left on the clock," she wrote, saying it all depends on how the IRS defines "healthy."

The IRS said that as of Nov. 10 it has processed all individual returns received before April 2022 if they had no errors and did not require further review. The IRS also said its backlog of unprocessed individual returns received this year was 4.2 million as of Nov. 4.

Collins reiterated her demand that the IRS adopt scanning technology that she said "would help drastically and would provide cause for optimism." She referred to the Taxpayer Advocate Directive that she issued to the IRS deputy commissioners in March and to her August appeal of the IRS's partial modification and rescission of that directive.

She also again expressed concern that thousands of new IRS hires would spend their time answering the phone and not work on the paper backlog. The IRS said last month that it had hired 4,000 new customer service representatives (CSRs) and plans to hire another 1,000 to be trained to field taxpayers' questions on the phone and provide other services during the 2023 tax season.

On Wednesday, the IRS said it plans to hire over 700 people to work in-person at Taxpayer Assistance Centers across the country.

The IRS "must continue to learn from the lessons of past filing seasons to improve taxpayer service, avoid causing self-inflicted challenges, and not aim to achieve the highest level of phone service if it comes at a cost of creating a paper backlog," Collins wrote. "Although it will result in fewer calls being answered in the short term, I recommend that CSRs rotate between both key roles during the 2023 filing season to provide the best possible service for taxpayers in the long term."

Source: www.journalofaccountancy.com