IRS Efforts to Clear Tax Return Backlog

Are you still waiting for your 2020 federal refund? Are you waiting for a response from the IRS to a letter you sent them last year? If you answered “yes” to either question, you are one of millions of taxpayers caught in the backlog of unprocessed returns and unanswered tax correspondence that is creating one of the most challenging tax filing seasons in our nation’s history.

The massive tax backlog was caused by a combination of COVID-19 shutdowns, staff shortages, and the additional workload to process COVID-related benefits passed by Congress. And that was on top of chronic IRS underfunding, anemic workforce growth, and outdated systems. Today, the IRS experiences historically low funding while they also administering one of the most complicated tax systems in the world.

It might seem kind of late, but on March 10th, the IRS announced an aggressive plan to end the pandemic tax return inventory by the end of 2022. The agency is taking a three-pronged, all hands-on-deck approach:

  • Hiring and Surging Thousands of Employees to Tackle the Backlog

The IRS plans to hold job fairs across the country to fill 5,000 open positions in the coming months, as well as an additional 5,000 new hires to be made by 2023. It is also creating new 700-person surge team to process new returns, amended returns, and answer taxpayer correspondence. They are also shifting 700 employees to three IRS processing centers. Interested in applying for an IRS job? Here’s the link: https://www.irs.gov/newsroom/irs-hiring-more-than-5000-positions-in-austin-kansas-city-ogden.

  • Increased Taxpayer Assistance to Reduce Processing Delays

Much of the backlog stems from small errors on millions of tax returns, requiring manual review by IRS employees before they can be processed. The IRS is stepping up efforts to help taxpayers file accurate returns by sending more than 100 million informational taxpayer letters, and providing additional help online, on the phone, and in-person. The IRS created and expanded self-service online portals for taxpayers and hired contractors to increase the capacity to answer taxpayer calls and staff offices for in-person assistance.

  • Developing and Deploying Updated Technology to Automate Functions

The IRS launched a new automated tool that reduces the need for manual review and correction. They also reconfigured systems to temporarily halt sending approximately 40 different notices to taxpayers and developed new automated support technology to help taxpayers with online live assistance and quickly answer taxpayer queries. More information about new IRS automation is here https://www.irs.gov/newsroom/irs-unveils-voice-and-chat-bots-to-assist-taxpayers-with-simple-collection-questions-and-tasks-provides-faster-service-reduced-wait-times.

This tax filing season is projected to be one of the most challenging in our nation’s history due to COVID-19 shutdowns and increased workload. The IRS is doing what is can with its limited funding to take a three-pronged all-hands-on-deck approach to meet the challenge.

Find Qualified Tax Help

Top down view of a cluttered desk with hands folded showing a watch.

The 2021 income tax filing deadline is on April 18th, less than five weeks away. Whether you’ve tried to prepare your own taxes or weren’t happy with your last tax preparer, you might want to find a tax preparer to help you out. Taxes can be complicated, and the rules change every year. Tax rule changes over the last few years were head-spinning, even for experienced tax pros.

Once you decide to get tax help, it’s essential to find qualified tax help. Why does this matter to you? Because you, the taxpayer, are responsible for all the information on your income tax return, no matter who prepared it. Hiring a qualified tax preparer who keeps up with all of the tax rule changes is a nonnegotiable requirement.

How do you find a qualified and experienced professional to prepare and file your income tax returns? Well, you can ask friends, hit the Internet, or head to the local tax preparation office to get the names of tax professionals to interview. Plan to interview two or three recommended tax pros to feel confident that she or he is qualified and that you feel comfortable interacting with her or him.

Follow these five tips to find qualified tax help:

  1. Ask about professional credentials, such as a Certified Public Accountant (CPA) or an Enrolled Agent (EA). Credentialed return preparers are required to fulfill annual continuing education. The IRS maintains a Directory of Federal Return Preparers with their credentials and qualifications at https://irs.treasury.gov/rpo/rpo.jsf.
  2. Verify that the preparer has a Preparer Tax Identification Number (PTIN) and enters it on your return that is electronically filed with the IRS. Tax preparers who charge a fee are required to have a PTIN and to file returns electronically or submit a valid reason for paper filing the return.
  3. Inquire about the tax preparer’s education and training, and how she or he keeps up with tax law changes and IRS processes. Tax pros who are not a CPA or EA should still get annual tax updates to keep up their knowledge.
  4. Ask about service fees and get a cost estimate in writing. Avoid tax preparers who base their fees on a percentage of the refund, or who want their fee paid by direct deposit from your refund. These are both unethical practices prohibited by IRS regulations.
  5. Make sure the tax preparer is available all year, even after tax season is over, in case you need her or him. For example, notices can come from tax agencies any time of the year. Tax projections sometimes need refreshing before estimated tax payments are due again.

Feeling confident about the tax services you get starts with selecting a qualified tax preparer who keeps up with tax law changes. Whether that person is a CPA or an EA, or not, following the five tips above are a good start to get qualified tax help. Need more details? The IRS has them for you at https://www.irs.gov/tax-professionals/choosing-a-tax-professional.

Advance Child Tax Credit Surprise

Many taxpayers with qualifying children received Advance Child Tax Credit (CTC) payments from July to December 2021. Advance payments of the CTC were part of the $1.9 trillion American Rescue Plan. Eligible families received monthly payments of up to $300 per qualifying child to help them bridge the financial gap caused by the COVID-19 pandemic. Payments were processed by the IRS using taxpayer information they already had on file.

Advance CTC payments were just that; an advance payment of the tax credit that would ordinarily be received this tax filing season, when income tax returns are filed for 2021. However, many taxpayers who are used to getting a federal tax refund could be in for a surprise when they go to file their 2021 return. Their expected refund is a lot less than they are used to getting. The reason? They got part of their tax refund in the form of six-monthly checks or direct deposits during the last half of 2021.

The tax pro-community, including me, wasn’t against the idea of advancing CTC payments to help parents with their monthly expenses. Actually, it was a terrific idea. We were concerned about the communication – or lack thereof – about how the advance payments would reduce the credit amount reported on the taxpayer’s return. Lower federal tax refunds during filing season were not explained clearly enough for most impacted taxpayers to understand.

Failing to manage expectations for a lower federal refund has resulted in an abundance of Advance Child Tax Credit Surprises. For some people, a lower refund is merely an inconvenience or an annoyance. But for others, it could create financial hardship or personal debt. For now, it doesn’t look like the Advance CTC will be reenacted. If it is, the IRS has an option to decline the advance payments and determine the credit amount when filing a federal income tax return. More information about the Advance CTC is on the IRS website at https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021.

They must be getting a lot of questions because the IRS also posted answers to Frequently Asked Questions about the filing of 2021 taxes this season with Advance CTC. Hopefully, your questions are addressed here https://www.irs.gov/credits-deductions/filing-season-2021-child-tax-credit-frequently-asked-questions.