The year’s tax filing period is upon us and the Internal Revenue Service is still dealing with a backlog from previous years.
National Taxpayer Advocate Erin M. Collins released her report to congress earlier this month calling 2021 “the most challenging year” for taxpayers and tax professionals and said tens of millions of taxpayers experienced delays in processing their returns.
Jan. 24 marked the first day of this year’s tax filing season. Collins estimated the backlog of unprocessed returns at more than 8.6 million individual income tax returns and 2.8 million business returns and about 5 million pieces of unanswered mail as of mid-December.
Samantha Slapnik with Liberty Tax said these issues were on her radar and described the situation as frustrating for all.
“The IRS hold music is permanently embedded in my brain,” she said. “We’ve been dealing with extreme delays since the onset of COVID in 2020 (tax year 2019) when most processing centers were closed for at least 10-12 weeks. The extended tax seasons in 2020 and 2021 further compounded the issue. “What used to take three to four months for processing is now at six to eight months at best. It is extremely frustrating for both tax payers and industry folks who are at the mercy of a short-staffed IRS.”
Collins said COVID-related delays exacerbated existing problems of underfunding of the IRS.
“The number of individual income tax returns the IRS receives has increased 19 percent since 2010 while its baseline appropriation on an inflation-adjusted basis has decreased by nearly 20 percent,” the report said. “This imbalance has left the IRS without enough resources to meet taxpayer needs, let alone to invest in additional personnel and technology.”
Still, taxpayers must press forward to submit this year’s filings on time
“The sooner we can get returns in process, the better,” Slapnik said. “The continued processing delays from prior years are still leaking into our current tax season.”
Slapnik said tax law changes also may require further processing from the IRS including the Recovery Rebate Credit which is related to the third stimulus payment and the Advanced Child Tax Credit payments.
“Any taxpayer who did not receive eligible payments can apply for these credits on their return, but it will require the IRS to manually process these returns which could take weeks longer than the standard 21 days,” Slapnik said.
Businesses also should be prepared to face possible delays.
“Self-employed folks filing a Schedule C are not only facing the same processing issues as all personal returns, but they are also facing increasingly strict due diligence requirements from the IRS including more attention to incorrect, over- or under-stated income and expenses,” Slapnik said. “S-Corporations, C-Corporations and partnerships continue to be processed within the same time frames if filed electronically. If for some reason a return has to be paper-filed, then we're looking again at extreme processing delays.”
Reporting correct information the first time will help.
“Don't guess or estimate income, expenses or credits,” Slapnik said. “Use a professional and make sure the information you are filing is correct, consistent and complete.”
Collins called paper kryptonite for the IRS and encouraged electronic filing where possible.
People who make less than $58,000 are eligible for Volunteer Income Assistance (VITA)which offers free help with tax filing. Additionally Tax Counseling for the Elderly (TCE) offers help for people age 60 and older.
Learn more about VITA and TCE.
Slapnik is hosting a class at the chamber Feb. 2 at 8:30 a.m. covering what you need to know for this year’s tax season. Complimentary breakfast is provided by Bojangles. Register. Additionally, Liberty Tax offers chamber investors and their employees 20 percent off personal tax returns through our Member-to-Member Discount program.
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