With tax season looming, 99 GOP lawmakers sent a letter to Internal Revenue Service Commissioner Charles Rettig, giving him until December 17 to explain how the agency plans to resolve the huge backlog and alleviate the burden on taxpayers.
Nearly 10 million 2020 and 2021 tax returns remain unprocessed—meaning paper returns have not been opened and returns have not been entered into the IRS’s master list, according to recent data provided to Congress by the Treasury Inspector General for Tax Administration (TIGTA).
“This massive backlog is causing significant and unnecessary burdens for families and small businesses who can’t get answers from the IRS about why the returns have not been processed,” said House Minority Leader Kevin McCarthy and other GOP lawmakers, who warned that the IRS “is in danger of falling into a vicious backlog cycle that will harm millions of taxpayers.”
Lawmakers gave IRS Commissioner Rettig until December 17 to answer a series of questions about what the IRS’s plan is to process all paper returns before the official start of the 2022 tax season. Questions include:
- Has the IRS returned to regular, in-person work and if not, what steps is the agency taking to do so.
- Will the IRS use its authority to hire additional non-enforcement employees to help process tax returns this year and next year if necessary?
- What steps is the IRS taking to resolve issues with 5 million suspended returns;
- For taxpayers who have unprocessed 2020 or 2021 returns, what will the IRS do to “alleviate their burden?”
Lawmakers said their concern is “underscored” by the frequent calls and letters they are receiving from constituents about IRS processing delays and inadequate taxpayer assistance.
“The Taxpayer Advocate Service’s recent decision to no longer accept any cases regarding amended returns will only exacerbate this problem,” the lawmakers said.
While the Biden Administration is asking for funding for tens of thousands of additional IRS auditors, the agency is ignoring the fact that the voluntary compliance rate in the US is 80% and the service does not have service or tech personnel to accommodate basic processing, the lawmakers said.
“Tons of folks were having issues before the pandemic. Now it's a cluster,” Raymond James financial advisor and CPA Thomas Scanlon told Financial Advisor Magazine.
Edward Karl, Vice President of Taxation for the American Institute of CPAs (AICPA) said the trade group gets multiple calls a day from CPAs whose clients are being hamstrung and sometimes harmed by IRS processing delays and the erroneous penalty letters, liens and levies that have resulted.
“We get calls every day and they have a very similar theme. We hear: ‘We sent in a return and we haven’t heard back. We had a large refund we haven’t received. We sent in a return that showed an overpayment and now we are getting lien and levy notices with interest and penalties because the IRS hasn’t applied the overpayment,’” Karl said.