The Causes
The COVID effect: The IRS has been in a state of disarray since the COVID pandemic shutdown operations in March 2020. The IRS call center desks are so tightly packed together that when one employee tested positive for COVID, they sent the entire floor home. This caused massive delays on the IRS telephone lines.
Increased Automation: Most IRS Notices these days are generated by their computers and mailed without ever being reviewed by an agent. This practice has caused a large increase in incorrect notices that must be researched and addressed by taxpayers and their accountants.
Tax Law Changes: The CARES Act passed during the middle of the tax season created many benefits to individuals and businesses to help them through the pandemic shutdown. However, the tax changes also caused a huge backlog of tax returns that had to be amended or reviewed manually at the IRS by a human agent. Refunds that typically take 21 days to receive extended to well over 12 weeks. The IRS is still struggling to catch up.
Current Backlog as of October 21, 2022
- Individual Returns: 3 million original returns awaiting processing
- Business Returns: More than 4 million original business returns awaiting processing
- Individual Amended Returns: 1.3 million unprocessed returns; processing time greater than 20 weeks
- Correspondence Delays: 4.5 million pieces of correspondence awaiting processing
Figures from the Taxpayer Advocate Service blog post 11/10/22. Read full post here.
How are we working around the current situation?
Our first and foremost way to avoid these delays is to e-file complete and accurate tax returns. These returns get processed automatically when the data we submit matches the data on the IRS computers reported to them by your employers, mortgage lenders, and other 1099 issuers. It’s imperative to provide us with all tax documents related to your tax return each year.
When a client does receive an IRS notice, we request that they get a copy of it to us as soon as possible to evaluate. In many cases, we determine the accuracy of the notice without involving the IRS at all. If there is an error on the notice or we need additional information from the IRS, we will draft a response letter for the client to send to the IRS. Our team is just as frustrated as you are about the delays in IRS processing and response times! Our best option is to respond to every notice quickly and accurately and document, document, document along the way.