The Internal Revenue Service is bracing for a flood of tax returns Monday, the official deadline, in a system beleaguered with delays.
As of March, the IRS had not processed more than 12 million returns from the 2020 tax year. The backlog will significantly hamper the agency’s ability to process this year’s returns.
IRS Commissioner Charles Rettig warned Congress this month that the agency was laboring with a personnel shortage and a growing document backlog during the COVID-19 pandemic.
“The IRS is serving more people and entities in a global environment than ever before while handling new and bigger responsibilities,” Mr. Rettig said. “At the same time, we have experienced delays in updating our IT systems, which means the IRS and taxpayers must continue to use certain paper-based processes.”
Individuals are likely to face more delays in receiving refunds, and the slowdown may cost taxpayers billions of dollars overall. A Government Accountability Office audit published last week found that the IRS shelled out more than $3 billion last year in interest payments for delayed refunds.
To reduce the backlog, IRS officials say, they have implemented mandatory overtime for staff. The agency is also using funding from President Biden’s budget to hire an additional 10,000 people to help process returns.
Even with additional staff, however, the IRS does not expect to clear the document backlog until the end of this year.
Republicans say that is simply too long to wait and that a large portion of IRS employees working from home has likely contributed to the delay.
“One of the fastest ways to eliminate the backlog of millions of unprocessed tax returns is to have the IRS bring all of their employees back to the office,” said Rep. Mike Kelly, Pennsylvania Republican. “Their telework policy won’t end until June — well after [the 2021] tax filing deadline.”
IRS officials defended the lenient teleworking guidelines. Even before the COVID-19 pandemic, they said, a portion of the agency’s workforce was not mandated to go into the office.
“Before the pandemic, a significant percentage of IRS employees were teleworking,” said Mr. Rettig. “We have a union contract … and we follow the terms of that contract, and it requires telework-eligible positions to be teleworking.”
Agency executives blame the backlog largely on the number of taxpayers who file their returns in paper format rather than electronically. Paper returns have to be reviewed by staff and hand-scanned into the agency’s system before refunds are processed.
COVID-19 is also a contributing factor. Mr. Rettig told Congress that the agency could not properly hire staff during the height of the pandemic. Even now, the IRS has been able to hire only 2,000 out of the 10,000 additional staff members approved.
“The pandemic caused significant hiring challenges, including low applicant pools in some locations, delays in fingerprinting due to closed facilities, and delays in processing applicants virtually,” Mr. Rettig said.
Republicans said the issues afflicting the agency are not results of the pandemic but rather mismanagement and poor planning.
“This is not simply a problem of taxpayers choosing to deluge the IRS with paper-filed returns,” said Sen. Mike Crapo of Idaho, the top Republican on the Senate Finance Committee. “In many cases, IRS forms and schedules simply cannot be electronically filed, including where a taxpayer could e-file and attempts to do so, but is rejected by the IRS’s confusing digital signature process.”
Democrats said the IRS is not to blame for circumstances wracking its ability to deliver tax refunds promptly. They blamed Republican budgets in the past decade for hamstringing the agency’s performance.
“If you’re frustrated by poor customer service from the IRS, you have years and years of Republican cuts that have contributed mightily to the ability of the agency to meet your expectations,” said Senate Finance Committee Chair Ron Wyden, Oregon Democrat.
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