While the IRS sent out two stimulus checks and updated the Child Tax Credit this year, it’s falling short of its core mission of servicing American taxpayers.
(CBS New York) — The Internal Revenue Service (IRS) has had a busy year. A June 30 report from National Taxpayer Advocate Erin Collins says the agency has completed 136 million tax returns, distributed two more rounds of stimulus checks, revised rules for unemployment insurance, and prepared for the launch of advance Child Tax Credit payments (which have since started). The IRS accomplished all of this during what is hopefully the last part of a pandemic, which followed a decade of staffing and funding cuts. But their efforts to weather what Collins described as a “perfect storm” fell a little short. The report pointed out that over 35 million tax returns (roughly two-thirds of which are refunds) remained unprocessed or in some stage of processing. The agency has certainly decreased that number in the last month. But millions of tax refunds are still pending. “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 at the time of the report account for 20 percent of the total returns submitted. And with the May 17 federal tax deadline well in the past are the time of the report, the IRS was well beyond its goal of processing returns in 21 days. A variety of reasons account for the ongoing 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. 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.
