National Taxpayer Advocate Annual Report to Congress
Each year, Erin Collins delivers her National Taxpayer Advocate Report to Congress. This report for 2021 calls the year the most challenging year ever for taxpayers and tax professionals. Tens of millions of taxpayers experienced delays in processing their returns, and this translated directly to delays in receipt of refunds as well.
Challenges from COVID shutdowns were the top issue, as workers sent home were not able to do their jobs remotely. Add to that the various stimulus payments and special programs related to the pandemic, and you get a major slowdown of processing returns. The IRS reports that its workload increased by 19% while the workforce decreased by 17%.
Challenges for Taxpayers
While the report is about the issues of the 2021 tax year, Collins stated that she is deeply concerned about the upcoming 2022 filing season as well. The IRS is buried in paperwork. As of late December 2021, the IRS had a backlog of:
- 6 million unprocessed individual returns (Forms 1040)
- 2.3 million unprocessed amended individual returns
- 2 million+ unprocessed employers’ quarterly returns
- 5 million pieces of taxpayer correspondence
Many taxpayers are still awaiting their refunds, more than nine months late.
You may be one of millions who received a cryptic letter about “adjustments” to your return, but did not identify them or any dollar amounts, plus or minus. It was related to discrepancies related to Recovery Rebate Credit claims by taxpayers who did not receive some or all their stimulus payments the prior year.
The report statesi that there is likely to be a repeat of the suspensions requiring manual processing in 2022 as well. With Congress continuing to authorize stimulus payments for various reasons, the backlog of manual processing is expected to continue.
Cascade of Customer Service Problems
Customer service problems recorded included:
- “Where’s my refund requests” – The online tool for taxpayers to check the status of their refunds at IRS.gov received around 632 million requests. The tool does not provide information on unprocessed returns or explain status delays, reasons for delays, or where returns are in the pipeline.
- Worst telephone service ever – Telephone support requests almost tripled to more than 282 million phone calls. Customer service reps only answered about 32 million, or 11% of those calls.
- Long delays in notice response processing – When the IRS issued notices and taxpayers responded with information or questions, it has taken months to process and respond.
- Ten most serious taxpayer problems – Each year the report documents the ten most serious problems encountered by taxpayers. For 2021, they were:
- Processing and refund delays
- Challenges in employee recruitment
- Hiring and training
- Telephone and in-person service
- Transparency and clarity
- Filing season delays
- Limitation of online taxpayer accounts
- Limitations in digital taxpayer communications
- E-filing barriers
- Correspondence audits and the impact of collection policies on low income taxpayers
Along with a report of problems, the annual report provides recommendations to the IRS to improve services.
Administrative Recommendations to the IRS
Recommendations to address taxpayer problems included:
- Utilize scanning technology and reduce barriers to e-filing
- Deploy customer “callback” technology on all telephone lines to reduce hold times
- Improve online taxpayer accounts and allow taxpayers to communicate with the IRS routinely by secure email
- Create and update weekly a “dashboard” on IRS.gov to provide taxpayers with specific information about delays
The advocate’s report also provides specific recommendations to Congress, including:
- Provide better funding for the IRS to improve taxpayer service and modernize IT systems
- Extend the period for receiving refunds when the IRS postpones the tax filing deadline
- Authorize the IRS to establish minimum standards for paid tax return preparers
- Expand the U.S. Tax Court’s jurisdictions to hear refund cases
- Make the Earned Income Tax Credit simpler for taxpayers and reduce improper payments
- Expand the protection of taxpayer rights by strengthening the Low Income Taxpayer Clinic program
It is an extensive report, and of course it does not mean that recommendations will result in the requested actions, but each year the National Taxpayer Advocate delivers the report and recommendations.