The IRS is slowly working through a giant paper backlog.
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The House Ways And Means Committee wants answers from the Internal Revenue Service. In a series of recent letters, members of the tax oversight Committee have chided the IRS about sending out incorrect tax notices, raised concerns about a slow start to the 2021 tax season and jammed customer service phone lines, and called for a new, later tax day deadline for 2020 tax returns, given a backlog of 6.7 million 2019 tax returns.
For now the typical deadlines apply: Taxpayers have until Thursday, April 15, 2021, to file their 2020 tax return and pay any tax owed. The IRS started accepting 2020 tax returns on February 12, two weeks later than originally anticipated (there were all those Round 2 stimulus payments to get out, plus reprogramming IRS systems for December tax law changes). Here are some of the issues at hand, and how they might affect you.
Slow start to the 2021 tax season. In its first weekly report of the 2021 tax filing season to the Ways And Means Committee, the IRS said that it received about 20 million tax returns on February 12 and processed 14 million of them. By comparison, as of February 14, 2020, the IRS had received and processed 40 million returns. The IRS had already warned taxpayers of potential delays and a challenging tax season. Now that the statistics are out showing that the delays are real, the Committee is demanding to know how fast returns will be processed. The IRS says it expects to receive 160 million individual tax returns this year. If you’ve filed and are due a tax refund, check out the IRS Where’s My Refund? tool to get a personalized refund date. Most refunds are sent within 21 days of e-filing.
Jammed customer service phone lines. The Committee has asked the IRS to improve customer service by adding assisters to its phone lines (February 19th letter) as taxpayers are struggling to get through. Call volume has tripled over the same period last year, and only about 25 percent of taxpayers seeking assistance are getting through to the IRS. Of that 25 percent—which represents 6 million calls—only 2.7 million taxpayers spoke with a customer service representative and 3.4 million calls were directed to an automated message. Taxpayers are turning in droves to the IRS web site too. Visits have more than doubled over last year at this time, from 165 million in 2020 to 369 million in 2021. Before you pick up the phone, check out the IRS web site, which includes helpful Q&As such as Questions And Answers About The Second Economic Impact Payment.
Backlog of 6.7 million 2019 tax returns. The Committee has also asked the IRS when the 6.7 million 2019 and prior year tax returns in its backlog will be processed. As of November 24, the IRS listed a backlog of 7.1 million returns. That was down to 6.9 million as of year-end 2020, and the most recent data shows a 6.7 million backlog as of January 24th. At that rate of getting through 200,000 returns a month, it would take three years to work through last year’s paper backlog! There are another estimated 16 million paper returns coming for 2020, not to mention business returns. This backlog puts taxpayers in a bind. Some people are waiting for 2019 refunds; some people are waiting for stimulus payments that would have been based on 2019 returns.
To make matters worse, the IRS sent approximately 260,000 CP59 notices to taxpayers who the IRS claimed did not file a 2019 tax return. The IRS issued a statement saying that people who filed their 2019 return but nevertheless received the CP59 notice can disregard the letter and do not need to take any action because the IRS is still processing 2019 returns. It’s likely that many taxpayers receiving CP59 notices already filed the returns that the IRS claims are outstanding. Tax pro Claudia Hill of Cupertino, California is one of them. “I’m appalled by the numbers! I hate to think that I’m one of them,” she says. In her case, she had to file her 2019 return on paper because she’d been a victim of identity theft, and she filed it by the October 15 extension deadline. According to the IRS mission-critical functions update, as of February 17, in some cases, the IRS is processing tax returns dated as early as July 15, 2020. In the case of one client who filed a charitable trust tax return on paper with tracking proof that it was received, an IRS representative told Hill they’d looked everywhere for it but couldn’t find it so please send in a copy. If this happens to you, to be safe, write duplicate on every page of the copy, and include a copy of your original certified mail receipt. Hill consoled her client: “It will work out; they’ll process it eventually.” The Committee message to the IRS about the backlog was tougher: “Taxpayers deserve better, and the IRS needs to do better.” (another February 19th letter)
Could the April 15 tax day deadline be moved to July 15, 2021?
In a February 18th letter, Ways and Means Democrats, led by Oversight Subcommittee Chairman Bill Pascrell, Jr. (D-NJ), requested that the IRS extend the tax return filing season beyond April 15, 2021, given the ongoing nature of the COVID-19 pandemic and the condensed filing season due to the delayed start date. Last year, taxpayers and the IRS were dealing with the onset of the pandemic and initial closures, and the April 15th deadline was moved to July 15th. This year is arguably tougher, as taxpayers are still in the throes of the pandemic, and they’re dealing with two major tax laws (the Cares Act in March, and the Appropriations Act in December) that are making tax filing this season particularly challenging. In the February 19th letter, signed by Chairman Richard E. Neal (D-MA), the Committee asks that the IRS “continue to update the Committee on filing season issues and concerns, including whether the filing season should be extended.”
Further Reading: IRS Warns Of Delays And Challenges To 2021 Tax Season: 10 Tax Tips For Filing Your 2020 Tax Return