Updated: Feb 1
Does this sound like good news or bad news? The IRS is a mess.
Recently, the “National Taxpayer Advocate” Erin Collins testified before Congress that in her opinion, the IRS was doing a great job of processing most tax returns (electronically filed) and issuing most economic Impact Payments on a timely basis despite the challenges of COVID (the magic password for screwing up and getting away with it), an extended tax season (they’re the ones who extended it), new tax laws from Congress and now the demands on them to issue multiple rounds of child tax credit payments.
She did point out that there is a backlog of almost 17 million paper filed tax returns. (Today, that is more than half the total number of paper filed returns filed this year since most folks use e-file.)
So what’s the reason for IRS not processing all those returns? Mostly, their mail processing facilities are just so far behind, there is no “light at the end of the tunnel” as to when they will get caught up. I talked with one IRS agent a few months back and he admitted that at his facility, there were two large trailers of mail sitting out in the parking lot that had been there for almost 6 months.
Another reason for the hang-up is the IRS is scared of folks improperly claiming they didn’t get any stimulus payments last year and are asking for them in refunds with their 2020 returns. So, if your return (even electronically filed) is claiming any additional economic stimulus refund, expect your return to be routed to an agent for personal verification. We are seeing a lot of returns getting notices changing their refund because the 2nd stimulus went out in the form of debit cards and a lot of folks threw them away thinking they were junk mail.
Another huge problem the IRS is having, is staffing shortages. That’s right, not just your local Starbuck’s is having trouble getting enough employees to work, so is the IRS. Compounding the COVID related shortages, a large proportion of their senior experienced agents at the IRS are “baby boomers” who are retiring in large droves, leaving huge holes in the leadership and experienced auditor ranks.
Our suggestion to all our clients this year is… “This is a whole new world. The old way of filing, paying tax, and corresponding with the IRS via US Mail is over! E-file everything! Pay the balance due by authorizing the IRS to take it directly out of your account, or pay online via the IRS Direct Pay program (go to IRS.gov, type in “Direct Pay” in the search and voila). Even though it can take up to 2 hours of being on hold, calling the IRS to resolve problems is now the best way of getting something done quickly. If you mail in a letter to the IRS, our experience has been that in about 7-8 months, you will get a letter from the IRS acknowledging receipt, but explaining they are not able to answer your inquiry and will get back to you later. Sometimes another 6 months later!
Did you hear? Nehemiah 2:17a says, “You see the trouble we are in…” Kelly Bullis is a Certified Public Accountant in Carson