The IRS started the 2022 tax season behind, with a backlog of about 11.5 million individual and business returns that it had yet to process from previous years. But during the year, Collins’s report says, the agency whittled down that backlog to about 4 million returns by mid-December.
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Wednesday’s Taxpayer Advocate Service report says that the IRS owed refunds to about two-thirds of individual taxpayers in 2022, owing each household an average of almost $3,200. People who filed their tax returns on paper usually had to wait six months or longer to get their refunds. Some filed electronically and some businesses also ran into significant delays.
The report also looked at phone and mail response rates. Americans called the IRS with questions 173 million times in 2022, Collins wrote — but only 1 of 8 callers ever managed to get through to an IRS employee. That was less than half the rate in fiscal 2019, before the coronavirus pandemic.
The response rate on the dedicated line for professional tax preparers was only a bit better. And taxpayers are often paying for that, Collins said, because many professionals bill their clients for the time spent on hold with the IRS.
The IRS has $80 billion coming. It should be spent on answering the phone.
Collins condemned the IRS’s crumbling technology and slow customer service, which has dramatically worsened over the past three years since the agency curtailed some operations at the start of the pandemic.
She also faulted the IRS for its slow correspondence with taxpayers. On average, it took more than six months for the agency to process taxpayer responses — an increase of 104 days since fiscal 2019. In the meantime, while the taxpayers waited, they often could not access their refund or risked the IRS taking action against them because the agency did not realize that they had responded to the problem.
Inside the antiquated system, the IRS uses to process tax returns
In response to Collins’s report, the Treasury Department noted that the IRS had already used money allocated by Congress in the Inflation Reduction Act to hire 5,000 customer service representatives who will complete their training in time to start answering phones sometime during the upcoming tax season. Treasury Secretary Janet L. Yellen has promised the agency will answer five times more phone calls this year.
Collins said the budget increase provides optimism for the future. “We have begun to see the light at the end of the tunnel,” she wrote. “I am just not sure how much further we have to travel before we see sunlight.”
Just before Collins’s report was released, the new GOP-controlled House passed a bill to repeal most of that increase in IRS funding.
The agency’s staff has shrunk by 17 percent since 2010 as its budget, in inflation-adjusted terms, has decreased.
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While Republican members of Congress say the increased funding for IRS enforcement will lead to onerous audits of middle-income taxpayers, Democrats say audits are meant to collect money from very rich people who are avoiding taxes, and much of the funding will go toward improving customer service problems such as those mentioned in Collins’s report. With Democrats in control of the Senate and White House, the bill to defund the IRS is unlikely to go any further.
In addition to hiring and training workers and modernizing its technology for processing paperwork, Collins called for the IRS to allow online accounts for taxpayers that would let them view IRS notices and upload documents in response. If correspondence with the IRS didn’t have to go through snail mail, and if more taxpayers could file returns electronically, she noted, the agency’s backlog would shrink further.