The IRS opened up tax filing this week for 2021 refunds, but many taxpayers are still waiting on last year’s refunds. A large number of taxpayers filed amendments last year when Congress changed a long-standing rule to make unemployment benefits tax-free during the pandemic.
The IRS is still processing many of those refunds, especially refunds associated with amended tax returns. Alysha Holliday, 30, of North Olmstead, Ohio, is frustrated by the delays. “You have to call at seven in the morning or you will not be able to talk with someone. I have called at 7:30 a.m., and the automated line has said that they are too busy and to call the next business day,” she said.
All of the emergency tax rules caused by the pandemic have led to a severe bottleneck effect within the IRS, stagnating their efficiency. Stimulus checks, child tax credits, and other variables all increased the volume of work for IRS agents. And now they face a new wave of returns for 2021.
Typically, the IRS gets around 35 million calls during tax season. Last year, it got 119 million, and that number could grow even more this Spring if the bottleneck worsens.
To make matters worse, the IRS faces steadily-increasing staff shortages. Currently, about 81,000 people work for the IRS, including about 10,000 temporary workers. In an interview with CNBC, Treasury Deputy Secretary Wally Adeyemo said the IRS needs more help.
“Today the IRS has as many employees as they had in 1970, while the U.S. population has grown by 60 percent,” he said. “This is because we failed to fund the IRS adequately.”
Tax refund processing only moves as fast as people can move
Adeyemo said he hopes the government will approve more money for the IRS in the near future. President Joe Biden’s enormous Build Back Better bill included $80 billion to increase enforcement and monitor small American transactions. However, the bill failed in the Senate after Democrats couldn’t agree on the broader details.
The National Taxpayer Advocate estimates the IRS backlog includes around 15 million total returns waiting for processing. Of them, about 9.8 million individual returns have errors. About 2.8 million are business returns. And lastly, about 2.3 million are amended returns, like Holliday’s.
Barry Melancon, president and CEO of the American Institute of CPAs, said that taxpayers should be patient first and foremost. It could take months before the IRS processes an amended tax return, which the agency typically processes manually.
“An amended tax return is about correcting an error or being responsive to a request by the IRS or sometimes things change,” said Melancon. “So, it really depends on what the ‘it’ is as to how long it will take.”
Holliday added that she doesn’t know whether to file another return while last year’s is still pending.
“It’s really hard to place blame on something because, you know, I do have a heart,” she said. But, “it’s not fair to the people who are doing what they need to do. And I feel like we’re being penalized for it.”
