The national taxpayer advocate has reported that the Internal Revenue Service, or IRS, is expected to start the coming tax season with a backlog of over ten million unprocessed returns from 2021.
Erin M. Collins wrote in the report to Congress that the returns come from the “most challenging year taxpayers and tax professionals have ever experienced.”
While kicking off the season with a backlog is not something new, the number of unprocessed returns is now far bigger than that from before the pandemic. Collins stated in her report that “There is no way to sugarcoat the year 2021 in tax administration: From the perspective of tens of millions of taxpayers, tax administration did not work for them.”
There are several reasons behind the size of this backlog, one of them being the fact that the IRS was charged with additional tasks since the pandemic started, such as the stimulus packages offered by the government. In addition to this, the agency has faced a reduction in the workforce due to Covid spreading among the personnel, as well as a result of considerable budget cuts.
Collins referred to the fact that the backlog is mainly composed of millions of paper returns by stating that “Paper is the I.R.S.’s kryptonite, and the agency is still buried in it.”
Despite the current unrest related to the backlog, the IRS has warned taxpayers that the filing season will be slower as a result of the agency’s staff shortages.
Officials from the Treasury Department have specified that even during the first half of 2021, there were fewer than 15,000 employees handling over 240 million calls. This would result in one individual having to go through 16,000 calls.
In response to this situation, the Biden administration is making efforts to secure an additional $80 million, over a 10-year period, for the Internal Revenue Service. The money would be used to upgrade the technology of the agency and to increase its ability to handle considerably larger workloads.
The size of the considerable backlog is sure to delay the tax returns for many individuals. While there are no estimates regarding how long it would take for the IRS to process all of the returns, the delays are bound to place additional financial stress on taxpayers that are currently navigating uncertain times due to the pandemic.
Those who were banking on their tax returns may have to look for ways to reduce expenses and increase their income. Many Americans have changed their financial habits in response to the pandemic, seeking to move to younger cities that offer more opportunities. Banks and personal financing companies have also changed their services to suit the needs of a population going through a large-scale pandemic, assuring individuals that even non-bankable home loans can be funded.
However, housing is expected to be only one of the many problems that taxpayers who included tax returns into their financial plans will face. School and college tuition fees must still be paid, regardless of how classes are held. Healthcare costs must also be taken into account, especially in the context of the ongoing Covid-19 pandemic.
Despite the large backlog that the IRS has to handle with less funding and fewer employees, Collins noted in her report that the agency handled the events that unfolded in 2021 far better than expected.
With a limited workforce and more financial incentives coming up in 2021, it remains to be seen if the IRS will be able to get through the entire backlog and keep up with the new tasks it will have for the current year.