The Internal Revenue Service ended this year’s tax filing season with a backlog of more than 35 million unprocessed returns, a four-fold increase over 2019, National Taxpayer Advocate Erin Collins said in a report to Congress Wednesday.
The 2021 tax season “was perhaps the most challenging filing season taxpayers, tax professionals, and the IRS have ever experienced,” Collins says in her report. The agency faced a “perfect storm” of challenges stemming from the Covid-19 pandemic and the relief efforts it was tasked with by Congress, including sending out three rounds of “stimulus checks,” or a total of about 475 million payments worth $807 billion. The agency also processed 136 million individual income tax returns and issued 96 million refunds totaling $270 billion.
“The IRS and its employees IRS and its employees deserve tremendous credit for what they have accomplished under very difficult circumstances,” Collins says in her report, “but there is always room for improvement.”
Breaking down the numbers: The unprecedented backlog of unprocessed filings includes nearly 17 million paper returns waiting to be processed, almost 16 million returns that require further review and another 2.7 million amended returns that have not been processed. The numbers are as of the end of filing season in May, and the IRS may have cut into its backlog since then.
Still, the number of returns awaiting processing has grown tremendously from 7.4 million in 2019 and 10.7 million in 2020, meaning that millions more filers likely have had to wait for their tax refunds. This filing season, 70% of income tax returns called for refunds, with an average refund of $2,827, according to the report.
Playing catch-up: Collins notes that new filings will slow dramatically now that tax season has ended and that IRS as of earlier this month had finished processing all Form 1040 returns from 2019 — yes, 2019 — leaving 800,000 business returns from 2019 to be manually processed.
That may be small consolation to taxpayers frustrated by their lack of a refund or by what the report calls a “historically low level of IRS telephone service.” The agency received more calls this tax season than ever before — more than 167 million, compared to an average of about 46 million for the prior three years. Only 9% of those calls were answered by a customer service representative, down from more than 20% the year before and 32% in 2018. Only about 3% of the more than 85 million calls to the Form 1040 support line were answered by a customer service agent.
“We can understand and articulate the challenges the IRS faced over the past year, but for individuals and businesses that waited nine months, 12 months, or longer to receive their refunds, the reality of the long delays was incomprehensible and in many cases, financially distressing,” the report says. “Taxpayers cannot experience similar challenges in future filing seasons. We cannot allow the agency to face the staffing and technology limitations it has experienced this past year. Americans deserve better.”