Headaches and Backlogs Loom as Tax Filing Season Nears Again

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Mid-April deadline rolls back as IRS tries to reduce piles of paperwork

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Nevertheless, the agency still grapples with a plethora of work from the messy 2020 tax year while facing new challenges, including retrospective legislation and the prospect of pandemic-era tax-law changes that require additional attention from taxpayers. will be required.

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“The IRS is going to start the filing season in a hole,” said national taxpayer attorney Erin Collins, who leads an independent group within the IRS.

At the end of December, The IRS Said It Was Timely is opening its mail and has processed returns received before April 2021 that do not require special attention or contain errors.

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But that means the agency, which was struggling with a flat budget before the pandemic, still had 6.3 million unprocessed personal returns and 2.3 million amended tax returns to process by December 18. Those amended returns may take more than 20 weeks, rather than the IRS. Normal 16 weeks, the agency said. It has cut the number of returns requiring special handling from 9.8 million in May to 42,000.

Anything in the IRS that requires a human eye or hands—paper returns, telephone calls, and correcting errors made in returns—can still be subject to significant delays.

“I don’t call them any more,” said Richard Pon, a San Francisco accountant who says it’s better to mail letters and wait several months for a reply, rather than wait hours to talk to clients. Go.” An IRS employee.

As tax season begins, the brakes Congress created to help people cope with the disruptions of the pandemic will lead to additional work. The advanced payment of the Child Tax Credit received during 2021 must appear on the tax return, and those who were eligible for March’s $1,400 economic stimulus payment but did not receive it can claim it on their return.

The IRS will send a notice to taxpayers in late January, with government records showing how much people received in stimulus and child-credit payments in 2021. A mismatch between those numbers and those listed on the tax return can delay processing in the form of an IRS address. discrepancies or errors. H&R Block’s chief tax officer, Cathy Pickering, said the process can be especially challenging for families that include children or have significant changes in income. Inc. Of

Tax Institute.

“Accuracy now has a value,” said Mark Steber, chief tax information officer for Jackson Hewitt Tax Service Inc., which generates nearly 2 million returns annually. “You’ll get your money. No doubt about it. But it may take an extra few weeks or months.”

Ms. Collins said filing electronically, using direct deposit and ensuring that child-credit and incentive numbers match the IRS notices will help taxpayers avoid a downturn.

IRS paper processing center employees are still operating under pandemic restrictions, making electronic filing more important, said Douglas O’Donnell, the agency’s deputy commissioner for services and enforcement.

“The pandemic has created unique challenges for the IRS,” he said. “IRS staff are working hard to prepare for the upcoming tax season as well as address outstanding tax returns.”

The IRS should take some of its new employees—even highly-skilled auditors—and redirect them to address choke points in tax filings, said Nina Olson, Ms. Collins’ predecessor, who retired in 2019. Had happened.

“What they need is to serve the majority of taxpayers who are trying to comply,” she said.

Ms. Collins said she is urging the IRS to provide more regular updates on its processing progress, so taxpayers filing during a given week can know that the IRS has started on that batch of returns rather than calling them. done or not.

And Congress could still retroactively change the 2021 tax law. Democrats slammed a $2 trillion education, health and climate-change bill, would increase the state cap on the state by $10,000 and local tax deductions to $80,000, starting with the 2021 tax returns people are due to file.

The IRS has not announced when it will begin accepting 2021 tax returns. Due to local holidays, Deadline for most people Maine and Massachusetts on April 18 and April 19. The IRS delayed the deadline to July 15 in 2020 and May 17 in 2021.

With deadlines and changes in laws, what once felt like a season now feels year-round and tedious, said Henry Grays, principal manager of tax practice and ethics at AICPA, an accounting organization.

“We have to recognize that we are in a world of the unknown on many different levels,” he said. “You just have to roll with what you know and move on from that basis.”

Tax preparers generally advise people to file as soon as possible. Since most people get a refund, filing earlier allows them to get the money quickly. Filing a valid return can help prevent an identity thief from using taxpayer information in the first place.

“If you get the information to your tax preparer at the beginning of the year, they have more time to think about it and help you,” Mr. Pon said.

Potentially extended tax breaks for state and local taxes may give some people a reason to wait to file their returns.

Generally, Congress is reluctant to change a prior year’s tax law once tax filing has begun, given the administrative burden on taxpayers and the IRS. But in March 2021, Congress retroactively reduced income tax on unemployment benefits received in 2020, and the IRS issued nearly 12 million refunds to those who had already paid and paid taxes on that income. The agency expects the work to continue through 2022.

The same could happen with state and local tax deductions, where the IRS could start accepting 2021 returns before Congress’s final decision on what the 2021 tax code is.

“On the one hand, I think it’s great that Congress is trying to help so many taxpayers,” Collins said. “Its implementation is very painful.”

Write Richard Rubin [email protected] . Feather


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