Taxpayer Advocate latest IRS report
“We have begun to see the light at the end of the tunnel,” Erin Collins, the taxpayer advocate, wrote in her report. “I am not sure how much further we need to travel before we see sunlight.”
Collins condemned the IRS’s old technology and slow customer service.
The IRS received about 173 million phone calls in 2022, but only 13% got through to an IRS employee. “As a result, most callers could not get answers to their tax-law questions, receive help with their account problems, or speak with an employee about compliance notices,” Collins wrote.
Treasury Secretary Janet L. Yellen has promised the IRS will answer five times more phone calls. The IRS has hired 4,000 new customer service employees and plans to hire 700 employees to provide help at Taxpayer Assistance Centers across the nation.
The increased staff will take time before the taxpayer sees the results. The problem is that in order to train the new employees, experienced staff will be pulled from their regular work. The IRS will have to perform a challenging balancing act.
“In the short run, that may mean that fewer employees are assisting taxpayers, particularly experienced employees who are likely to be the most effective trainers,” Collins wrote.
The IRS started 2022 with an unprocessed backlog of 4.7 million original returns and 3.2 million original business returns. The backlog has been reduced to 400,000 individual paper returns and 1 million business returns.
Filing a paper return can slow your refund by months. About 13 million individuals filed paper returns last year and generally experienced delays of six months or longer.
Returns that were flagged for potential identity theft delayed refunds. The IRS website states that “due to extenuating circumstances caused by the pandemic, our identity theft inventories have increased. On average, it is taking about 360 days to resolve identity theft cases.” Collins said the long delay was unacceptable and urged the IRS to assign more employees to process the identity theft cases.
The Treasury Department said that the IRS problems resulted from years of underfunding. As a result, the IRS audits almost 80 percent fewer millionaires than it did ten years ago.
Collins recommended that the IRS allow online accounts for people that would let them view notices and upload documents requested. By avoiding correspondence going through the mail, taxpayers could resolve the issue faster and get their refunds sooner.
“If spent wisely, this funding will give IRS management the tools it needs to bring U.S. tax administration into the 21st century by enabling it to hire and train the workforce of the future, replace antiquated IT systems, and generally revamp the taxpayer experience based on principles of fair and equitable tax administration,” Collins wrote.
As a result of the pandemic, the Earned Income Tax Credit (EIC) rules were changed so that more people would qualify for the credit. Previously, if you didn’t have a qualifying child, you had to be at least 25 and under age 65 at the end of the year. For the first time, the EIC is available in 2021 for both younger workers and senior citizens. There is no upper age limit for claiming the credit if taxpayers have earned income.
The maximum EIC for people without children almost tripled in 2021 to $1,502. The EIC expansions for young adults and seniors without qualifying children are temporary. Congress must take action to extend these expansions or, even better, make them permanent.
Senior citizens may not have filed a tax return in previous years because they weren’t getting a refund, and their low income didn’t require them to file. As a result of the changed EIC rules, people who didn’t file in previous years might receive a refund in 2022.
When filing your 2021 return, you have the option of using your 2019 earned income to calculate your 2021 EIC. However, your 2019 earned income must be more than your 2021 earned income to use this option. Using your 2019 earned income could result in a larger refund if you had very little earned income in 2021.
You will need to file an amended return if you have already filed your 2021 return and discover you would benefit from using your 2019 earned income.
The Taxpayer Advocate has also reported that people have failed to claim the Recovery Rebate Credit, the Child Tax Credit.
The Recovery Rebate Credit is available for people who didn’t receive the stimulus in 2021. If you didn’t receive the full amount of stimulus you were entitled to, you can claim it as a Recovery Rebate Credit on your return. You may be able to receive the full amount of these credits, even if you have no income or are not usually required to file a federal income tax return.
For the tax year 2021, the Child Tax Credit increased from $2,000 per qualifying child to $3,600 for children under age 5, and $3,000 for children 6 through 17 at the end of 2021.
TAS is also trying to make people aware that time is running out to claim the credits on your 2021 federal income tax return using the IRS’s Free File.
David Zubler is a tax accountant and Enrolled Agent in East Tennessee, providing tax strategies and representing clients before the IRS and has over 25 years of tax experience. He is the author of six tax books and has shared tax advice on national TV. He is the founder and president of Your Tax Care. The company provides business and tax education, including David’s one-minute tax tip radio recordings at YourTaxCare.com. David can be reached at (865) 363-3019 or contacted by email at firstname.lastname@example.org.