Taxpayers face overloaded IRS as filing season opens Monday
Washington — Count 30-year-old Ethan Miller among that subset of Americans who are actually eager to file their taxes once income tax filing season opens on Monday.
The financial planner who lives in Silver Spring, Maryland, is looking forward to claiming the new deductions that will come from buying a home. He also wants to get a jump on a tax season that promises to bring lots of extra headaches and delays for filers this year.
“I’m trying to get a head start on my taxes as much as possible,” Miller said, adding that he is not too nervous about forecasts of extra delays because he will file online and will not be waiting for too big a refund.
Plenty of other filers, though, may be in for more heartburn.
An IRS worker shortage, an enormous workload from administering pandemic-related programs and stalled legislation that would have given the agency billions of dollars for more expeditiously processing returns will combine to cause taxpayers pain this filing season.
“The IRS right now has unacceptable backlogs and the customer service that people are receiving is not what the American public deserves,” White House press secretary Jen Psaki acknowledged Friday. “The agency has not been equipped with the resources to adequately serve taxpayers in normal times, let alone during a pandemic.”
She stressed that the problems predate the Biden administration and she urged understanding for beleaguered workers already saddled with huge backlogs. “It’s going to take some work, it’s going to take some time and I think people need to understand that they need funding,” Psaki said.
Agency officials are already warning filers that “in many areas, we are unable to deliver the amount of service and enforcement that our taxpayers and tax system deserves and needs,” as IRS Commissioner Chuck Rettig put it earlier in the month.
Delays in processing are to be expected — especially because the IRS says it still is working through 2020 tax returns.
During the 2020 budget year, the IRS processed more than 240 million tax returns and issued roughly $736 billion in refunds, including $268 billion in stimulus payments, according to the latest IRS data. In that same time frame, 59.5 million people called or visited an IRS office.
Donald Williamson, an accounting and taxation professor at American University in Washington, said he expects “weeks and weeks” of IRS delays in 2022.
“You can blame Congress or the IRS. I imagine they’re trying to do the right thing but it just adds to further complexity,” he said. “My advice in 2022 is file early, get started tomorrow and try to put your taxes together with a qualified professional.”
Williamson said he advises his clients to file electronically, and those who expect hefty refunds in the tens of thousands should expect greater delays. Most backlogged returns were filed on paper and are amended returns.
Deadlines to file have been extended in the past two years due to the pandemic. It is unclear whether this year the agency will offer similar leeway to taxpayers.
There will be plenty of new issues to navigate this year.
For example, individuals who are eligible to claim the child tax credit and have gotten advance payments throughout the year may get a smaller refund than they normally would see.
People who did not get stimulus checks that they were qualified for as part of the pandemic relief package might yet be able to claim a “ recovery rebate credit ” on their taxes.
On Thursday, the IRS released a list of “Top 5 Things to Remember,” with suggestions for taxpayers on what documents to pull together and what to do if their 2020 returns still have not been processed.
The IRS anticipates that most taxpayers will receive their refund within 21 days of when they file electronically, barring any issues with processing their return.
But plenty of pitfalls remain, in part due to staffing troubles at the IRS.
Tony Reardon, president of the National Treasury Employees Union that represents IRS workers, said the agency “has a hard time recruiting because they’re up against Burger King or McDonald’s,” which offer similar pay without requiring workers to “deal with confusing rules and regulations.”
As of Thursday, the agency’s careers website listed at least 180 open jobs, including clerks and tax examiners paid as little as $11 an hour. Of those, 42 positions were open to the public; most were available only to internal applicants.
A hoped-for $80 billion infusion for the agency was included in versions of President Joe Biden’s proposed package of social spending programs but that stalled on Capitol Hill.
Reardon said the IRS “is in a lot of trouble in terms of how it is effectively able to carry out its mission and that has to be rectified.”
“I think clearly the taxpayer gets the brunt of this,” he said, adding that IRS workers get “the brunt of that blame under horrible circumstances.”
Top 5 things to remember
1. File an accurate return and use e-file and direct deposit to avoid delays.
Taxpayers should electronically file and choose direct deposit as soon as they have everything they need to file an accurate return. Taxpayers have many choices, including using a trusted tax professional. For those using e-file, the software helps individuals avoid mistakes by doing the math. It guides people through each section of their tax return using a question-and-answer format.
2. For an accurate return, collect all documents before preparing a tax return; make sure stimulus payment and advance Child Tax Credit information is accurate.
In addition to collecting W-2s, Form 1099s and other income-related statements, it is important people have their advance Child Tax Credit and Economic Impact Payment information on hand when filing.
In late December 2021, and continuing into January, the IRS started sending letters to people who received advance CTC payments. The letter says, “2021 Total Advance Child Tax Credit (AdvCTC) Payments” near the top and, “Letter 6419” on the bottom righthand side of the page.
The letter contains important information that can help ensure the tax return is accurate.
People who received advance CTC payments can also check the amount of the payments they received by using the CTC Update Portal available on IRS.gov.
Eligible taxpayers who received advance Child Tax Credit payments should file a 2021 tax return to receive the second half of the credit. Eligible taxpayers who did not receive advance Child Tax Credit payments can claim the full credit by filing a tax return.
In late January, the IRS will begin issuing letters to people who received a third payment in late January 2021. The letter says, “Your Third Economic Impact Payment” near the top and, “Letter 6475” on the bottom righthand side of the page.
Most eligible people already received their stimulus payments. This letter will help individuals determine if they are eligible to claim the Recovery Rebate Credit (RRC) for missing stimulus payments.
People who are eligible for RRC must file a 2021 tax return to claim their remaining stimulus amount.
People can also use IRS online account to view their Economic Impact Payment amounts.
3. Avoid lengthy phone delays; use online resources before calling the IRS.
Phone demand on IRS assistance lines remains at record highs. To avoid lengthy delays, the IRS urges people to use IRS.gov to get answers to tax questions, check a refund status or pay taxes. There’s no wait time or appointment needed — online tools and resources are available 24 hours a day.
4. In order to validate and successfully submit an electronically filed tax return to the IRS, taxpayers need their Adjusted Gross Income, or AGI, from their most recent tax return.
For those waiting on their 2020 tax return to be processed, make sure to enter $0 for last year’s AGI on the 2021 tax return. For those who used a Non-Filer tool in 2021 to register for an advance Child Tax Credit or third Economic Impact Payment in 2021, they should enter $1 as their prior year AGI. Everyone else should enter their prior year’s AGI from last year’s return. Remember, if using the same tax preparation software as last year, this field will auto-populate.
5. Free resources are available to help taxpayers file.
There are many options for free help, including many resources on IRS.gov. For those looking to avoid the delays with a paper tax return, IRS Free File is an option. This year, there are eight products in English and two in Spanish. IRS Free File is available to any person or family who earned $73,000 or less in 2021. Qualified taxpayers can also find free one-on-one tax preparation help around the nation through the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs.