The start of a new tax filing season often brings with it longer hold times with the IRS, as taxpayers and their tax preparers inundate phone lines with questions and concerns. But the 2022 filing season promises to be particularly challenging.
The IRS continues to work through a backlog of millions of paper-filed returns and correspondence from the 2021 tax filing season. Add staffing challenges and congressional underfunding to the issue and trying to track down a missing refund or deal with an unexpected tax notice is bound to be frustrating.
Roots, Results of the IRS Backlog
As of December 2021, the IRS had a backlog of 6 million unprocessed individual income tax returns, 2.3 million amended returns, and more than 2 million quarterly payroll tax returns, according to a statement from the Taxpayer Advocate Service (TAS).
That backlog stems from a combination of COVID-related shutdowns at many of the agency’s processing centers, budget cuts that forced reduced staff sizes, and the IRS overseeing new initiatives, such as stimulus payments and the expanded Child Tax Credit.
Reaching the IRS via phone hasn’t been easy in recent years, and the problem likely will worsen. According to the TAS report, there was a record 282 million taxpayer calls to the IRS in 2021, but the agency answered just 11% of those calls and those who did get through endured long wait times and frequent disconnects.
Understanding what’s going on behind the scenes isn’t much help when you’re facing missing tax refunds, incorrect notices, and other tax troubles. The following tips can help you navigate the IRS backlog and get the answers you need.
- Tip 1: Don’t Procrastinate. Depending on how your business is structured, your business return may be due March 15 or April 15, and you always have the option of requesting a six-month extension. But you might want to file sooner rather than later. The earlier you file your tax return, the sooner it starts moving through the IRS system. Plus, if you work with a tax professional, they’ll appreciate having more time to prepare and review your return.
- Tip 2: Use E-File and Direct Deposit. The bulk of the IRS backlog comes from paper-filed tax returns, especially those that are incomplete or have other errors that need further review by a human. If you want your return to be processed quickly, file your return electronically. If you’re expecting a refund, request it be deposited into your bank account electronically. According to the IRS, combining electronic filing and direct deposit is the fastest way to receive your refund, and the agency issues nine out of 10 refunds in less than 21 days.
- Tip 3: Share (complete) copies of IRS correspondence with your tax preparer. Many taxpayers receive a notice from the IRS and snap a photo or scan just the first page and send it to their tax advisor. However, it’s important to share the complete copy of the notice or letter with your tax advisor. IRS notices and letters can include a lot of information, including problems the IRS has identified in your tax return and specific instructions on responding to and/or resolving the issue. Leaving this information out can make it challenging for your advisor to deal with the notice, leading to even more delays and errors.
Send a complete copy of the correspondence and any other essential documents to your advisor as soon as you receive the notice. Tax professionals have access to a unique IRS customer service line reserved for practitioners, but delays are common there as well, so don’t wait until the last minute to loop them in.
Finally, have patience. The good news is the IRS is working to catch up by fast-tracking hiring, reassigning workers, and scrapping plans to close a tax processing center in Austin, Texas. In the meantime, stay in touch with your tax advisor to be as proactive as possible.
Treasury Circular 230 Disclosure
Unless expressly stated otherwise, any federal tax advice contained in this communication is not intended or written to be used, and cannot be used or relied upon, for the purpose of avoiding penalties under the Internal Revenue Code, or for promoting, marketing, or recommending any transaction or matter addressed herein.