As of early last month, the Internal Revenue Service had 23.5 million tax returns and pieces of correspondence awaiting manual processing, including some paper returns filed as far back as April of 2021.
Nina E. Olson, a tax lawyer and the founder and executive director of the Center for Taxpayer Rights, describes the current problems at the IRS as the worst she’s ever seen—and she’s seen a lot. From 2001 to 2019, she served as the IRS’ National Taxpayer Advocate—an independent voice within the agency charged with helping individual taxpayers and making recommendations to Congress for change.
You can watch my full conversation with Nina above. Here are some thoughts directly from Nina on the sorry state of the IRS and how taxpayers can protect themselves:
The only thing that comes close to the problems we’re seeing now at the Internal Revenue Service was in 1985, when the agency was rolling out some new technology—technology it’s still using today. Back then, the processing centers got so behind on their work that employees started hiding tax returns in closets and putting them in bags in the trash. Now it’s way worse, with the IRS, for the second year in a row, entering the filing season with a backlog of millions of not yet processed returns and pieces of correspondence.
The pandemic exacerbated the IRS’ longstanding problems and brought them to the surface. The agency has been significantly underfunded for decades, has the most ancient technology in the federal government, and has resisted changes that could have reduced the current paper backlog. At the same time, the IRS has been charged with a dual mission—collecting revenue and dispersing benefits. During Covid-19, the IRS’ offices were shut down for several months even as Congress drafted it to play a key role in delivering Covid relief. It’s a miracle that the IRS got out the economic impact payments (stimulus checks) and the advanced child tax credit monthly payments as quickly as it did, but resolving discrepancies in the reporting of millions of those payments has created a huge additional workload.
Last week, Congress gave the IRS more money to improve taxpayer service and authority to speed up the hiring of 10,000 employees—if it can find them. But the service problems are not going to be fixed quickly. So taxpayers caught in the backlog need to understand what’s going on and to push on every possible lever. If an electronically filed tax return gets held up for some reason, it gets put in an “error resolution” que to be looked at by a human being. Last year, returns sat in that pile for an average of 75 days before they were even assigned to an IRS employee.
If your refund has been held up for months and you need the money, call the IRS—-I know it’s hard to get through, but once your return has been worked by error resolution the person on the phone should be able to tell you why it’s being held up and might even be able to resolve the problem, say, by fixing an incorrectly entered Social Security number, or helping you verify your identity. Meanwhile, if you get a “math or clerical error” notice—which adjusts the amount you owe—and you believe the notice is wrong, it’s crucial you answer within 60 days to preserve your rights. The Center for Taxpayer Rights (which I founded) has some practical advice here on delayed refunds and math error notices. If your problems with the IRS drag on and are causing financial hardship, call the Taxpayer Advocate Service or file a request for assistance (it’s known as a 911) from TAS. And contact your member of Congress. Even if that member can’t help (and sometimes they can), they need to know about the impact on their constituents of such poor IRS service.