IRS delays millions of taxpayer money – CBS New York
(CBS New York) – The Internal Revenue Service (IRS) has had a busy year. A June 30 report by national taxpayer lawyer Erin Collins says the agency filed 136 million tax returns, distributed two more rounds of stimulus checks, revised UI rules and prepared for the launch child tax credit advance payments (which have since started). The IRS accomplished all of this during what is hopefully the last part of a pandemic, which followed a decade of staffing and funding cuts. But their efforts to overcome what Collins described as a “perfect storm” failed somewhat. The report pointed out that more than 35 million tax returns (about two-thirds of which are refunds) had not been processed or were in the process of being processed. The agency has certainly reduced that number over the past month. But millions of tax refunds are still pending.
“The IRS and its employees deserve immense credit for what they have accomplished under very difficult circumstances, but there is always room for improvement. Collins wrote in his report.
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“This year, the IRS is facing an unprecedented number of returns requiring manual review, which is slowing the issuance of refunds,” Collins continued. “These backlogs are very large because most taxpayers overpay their excess tax during the year in the form of payroll deduction or estimated tax payments and are entitled to receive refunds when they file. their statements. In addition, the government uses the tax system to distribute other financial benefits.
The 35 million declarations pending at the time of the report represent 20 percent of the total declarations submitted. And with the federal tax deadline of May 17 well in the past being report time, the IRS was well beyond its goal of processing returns in 21 days. There are various reasons for the persistent delay.
Many of the factors that contribute to the backlog are largely beyond the control of the IRS. The agency entered the final tax season with millions of tax returns pending from 2019 and before. Like most office workers, many IRS employees have had to do their work from home during much of the pandemic. The paper returns, which were in trailers awaiting processing, were inaccessible. It was only when workers returned to the office that they were able to tackle these problems.
Pandemic-related tax code changes were also passed just weeks before tax season. The Consolidated Appropriations Act, 2021, which included the second $ 900 billion stimulus package, contains a “look back rule.” This allows Filers eligible for the Earned Income Tax Credit (EITC) or Supplementary Child Tax Credit (ACTC) to use their 2019 income to determine the correct amount on their 2020 return. The IRS did not have enough time to modify forms and adjust computer systems. As a result, millions of forms have to be processed manually through their error resolution system.
Discrepancies with the rebate recovery credit have also been set aside for manual processing. This is the credit people can claim if they received less than what they were entitled to on their first or second stimulus check. At one point, the Inspector General of the Treasury for Tax Administration reported that about a third of those who applied for the refund recovery credit had their forms flagged for review.
More reasons for the backlog
Since early 2021, the IRS has issued the second and third economic impact payments, better known as stimulus checks. The second, up to $ 600, began rolling out at the end of December 2020, as part of the law on additional funds for coronavirus response and relief. The third, up to $ 1,400, began releasing in mid-March, under the American Rescue Plan Act. The IRS began accepting tax returns on February 12. So the last check was processed during tax season, its busiest time of the year.
Another key part of the US bailout is the updated child tax credit. As of July 15, the IRS pays $ 3,600 per child to parents of children under the age of five. Half is in the form of six monthly payments and the other half in the form of a 2021 tax credit. This comes down to $ 300 per month and an additional $ 1,800 at tax time. The total amount increases to $ 3,000 per child for parents ages 6 to 17, or $ 250 per month and $ 1,500 at tax time. The IRS also implemented this new program for monthly child tax credit payments during tax season. Although the agency has now sent out three stimulus checks, it has no experience sending millions of periodic payments. The resources dedicated to the implementation of this program are resources not dedicated to its main mission, which is “to provide American taxpayers with superior service by helping them understand and fulfill their tax responsibilities and apply the law with integrity and fairness for all ”.
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Americans have not received this “top quality service” this year. The lower level of service started online and extended to face-to-face interactions over the phone.
With delays across the country, people have turned to the IRS’s Where’s My Refund tool for information on their pending refunds. (For the 2021 reporting season, the IRS processed 96 million refunds worth a total of $ 270 billion.) The tool can tell a taxpayer that their return has been received, approved, or sent. It does not provide any details on what is blocking the refund, what additional information might be needed for processing, or when it might be issued. This lack of transparency inevitably pushes people to call.
Taxpayers seeking information and advice turned to the agency’s toll-free telephone lines. And the number of people interviewed was staggering. The IRS received 167 million calls in the 2021 tax season, almost quadruple the number it received in the 2018 tax season. During peak hours, 1,500 calls were arriving per second. Not surprisingly, the level of service has dropped dramatically. Only nine percent of callers seeking tax assistance reached someone who could provide it. Calls to the 1040 hotline specifically only reached a live person three percent of the time
Overworked and underfunded
Collins’ report also cites limited resources and technological issues as reasons for the delays in processing tax returns. The agency has operated under many of the same limitations that plagued office workers around the world during the pandemic. This included working remotely, which can reduce efficiency. The IRS is also understaffed and underfunded. Congress has continuously slashed the agency’s budget over the past decade, with both funding and total employment declining by about 20%.
An IRS watchdog has informed Congress that budget cuts limit the agency’s ability to keep up with technology and collect taxes. The agency has long relied on an old programming language called COBOL. This is not necessarily a problem, unless the code is not kept up to date. And the IRS hasn’t kept it up to date. So when stimulus checks or tax code changes arise, the agency has to find and pay programmers to fix things. The IRS launched a modernization effort in 2019, but it relied on future funding. This funding has not yet materialized. As a possible example of the effects, “42 percent of printers and copiers in IRS submission processing functions were unusable or broken,” according to the report. President Biden is also looking to increase funding for the agency by $ 80 billion over the next decade. The budget would grow at a rate of 10 percent per year, and the workforce at a rate of 15 percent per year.
The start of tax season at a disadvantage contributed to the backlog of 35 million returns. Giving the IRS stimulus checks and the updated child tax credit at the same time took resources away from processing tax returns. And a history of understaffing and underfunding has prepared them for failure. All of this put a strain on Americans who relied on timely repayments. This tension continues.
“The historically high number of IRS returns requiring manual review means that most individual taxpayers in this group and many businesses will not receive timely refunds and will have to wait for the IRS to finally process their returns,” Collins wrote. “For taxpayers who can afford to wait, the best advice is to be patient and give the IRS time to resolve its backlog. But especially for low-income taxpayers and small businesses operating at the margin, late repayments can impose significant financial hardship. “
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First published Friday, July 2, 2021 at 3:39 p.m. ET.