Breaking the Code: IRS Backlog
By: Danny Richmond, Northeastern Co-Op
Monday, January 24, 2022 marked the first day of electronic filing for the 2021 tax season and the IRS is already behind schedule. With over 11 million unprocessed returns from 2020 and understaffing issues, there will surely be more delays moving into the upcoming tax season.
While the IRS has around 200 job openings, low wages paired with the chaos and complexity of the job continue to cause the IRS to lose potential employees to other similar-paying jobs. On top of that, the rise in COVID-19 case numbers results in a higher number of their employees continuing to work from home. As a result, taxpayers are struggling to connect with the IRS. In 2021, there were 282 million callers who had a slim 11% chance of reaching an employee, down from 24% in 2020 and 29% in 2019.
Due to the pandemic, distributions of three rounds of stimulus payments and the expanded child tax credit contribute to the buildup of unprocessed returns. The IRS has issued $812 billion in stimulus and over $93 billion in advanced child tax credit. These have required a significant addition to the workload of 157 million individual returns in 2020 and over 160 million expected individual returns for 2021.
If you have received any economic impact payment / stimulus checks or the monthly child tax credit prepayments in 2021, be on the lookout for letters from the IRS (Letters 6475 and 6419). These will be necessary for your 2021 income tax filings as they provide documentation of the payments received.
Please note: the IRS is now reporting that some of the letters regarding the child tax credit prepayments may contain inaccuracies. To combat these potential errors, the IRS revamped childtaxcredit.gov, which enables anyone who received advanced child tax credits to see how much they received and file an accurate return.
Despite the IRS’ delays, unprocessed returns, and refunds still waiting to be distributed from 2020, electronically filing a tax return and opting in for direct deposit / debit is the fastest and easiest process. Please reach out to us if you receive any notices from the IRS. As always, we will keep you up-to-date with the latest information available.
To ensure compliance with the requirements imposed on us by IRS Circular 230, we inform you that any tax advice contained in this communication (including any attachments) is not intended to and cannot be used for the purpose of: (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any tax-related matter(s) addressed herein.