While the IRS sent out two stimulus checks and updated the Child Tax Credit this year, it fell short of its core mission.
(CBS Baltimore) — The Internal Revenue Service (IRS) has had a lot on its plate during the recent tax season. In addition to processing 136 million tax returns, according to a report from National Taxpayer Advocate Erin Collins, it sent out a round of stimulus checks, updated rules for unemployment insurance, and prepared to launch advance payments for the Child Tax Credit. And the IRS, which has seen staffing and funding cuts over the previous decade, did all of this during the tail end of a pandemic. But their efforts to weather what Collins described as a “perfect storm” came up a little short. The agency still has about 35 million unprocessed tax returns. “The IRS and its employees deserve tremendous credit for what they have accomplished under very difficult circumstances, but there is always room for improvement.” Collins wrote in her report. “This year, the IRS is dealing with an unprecedented number of returns requiring manual review, slowing the issuance of refunds,” Collins continued. “These processing backlogs matter greatly because most taxpayers overpay their tax during the year by way of wage withholding or estimated tax payments and are entitled to receive refunds when they file their returns. Moreover, the government uses the tax system to distribute other financial benefits.” The 35 million pending returns account for 20 percent of the total returns submitted. And with the May 17 federal tax deadline over six weeks in the past, the IRS is well beyond the 21-day processing time it typically strives for. Myriad reasons account for the delay. Many of the factors that contribute to the backlog are largely beyond the IRS’s control. The agency came into the most recent tax season with millions of pending tax returns from 2019 and before. As with most office workers, many IRS employees had to do their jobs from home for much of the pandemic. Paper returns, which sat in trailers awaiting processing, were inaccessible. Only when workers returned to the office could they tackle these outstanding paper returns. Pandemic-related changes to the tax code were also passed just weeks before tax season. The Consolidated Appropriations Act,2021, which included the $900 billion second stimulus package, contains a “lookback rule.” That lets filers who qualify for the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) use their 2019 income to figure out the right amount on their 2020 return. The IRS didn’t have enough time to change forms and adjust computer systems. As a result, millions of forms have to be processed manually through their Error Resolution System.
