Status of the IRS Backlog

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According to a report issued by the Treasury Inspector General on September 2, 2021 – the IRS had a backlog of nearly 8 million paper business tax returns in 2020 due to COVID-19 pandemic (as of December 2020). That’s a 3,230% increase relative to the same time frame in 2019. The report found that the backlog, along with correspondence and other types of tax-related business needed to be addressed and processed.

Why?

  • The forced closure of Tax Processing Centers due to the pandemic resulted in significant backlog of unprocessed business tax returns
  • Tax Processing Center work is not conducive to remote telework environment with receiving, sorting, distributing mail and processing of paper tax returns (which requires manual input of information). They are open now, but were closed for some time, then opened with limited capacity because of social distancing, etc.
  • The IRS continues to have difficulty hiring sufficient staff needed to continue to work backlog inventory and process tax returns
  • Systemic payment processing limitations

Complicating matters…

  • Some tax penalties were erroneously assessed due to the delays in processing payments or tax forms
  • Ongoing tax legislation in response to COVID-19
  • It took time for the IRS to update their internal computer systems with all of the legislative changes

How are they fixing the problem?

  • Reopened the Tax Processing Centers in June 2020
  • The IRS has expanded operations, hiring approximately 3,500 new employees, although that meets only 53% of their recruitment goal (in advance of the 2022 filing season)
  • The IRS has moved returns and tax payments between processing centers to balance workloads
  • Correct the incorrect estimated tax penalties

By July 2021, the IRS had reduced the backlog significantly to 291,000, according to IRS official Kenneth Corbin, commissioner of the IRS wage and investment division.

Taxpayers should visit the IRS website to check the status of their returns: https://www.irs.gov/refunds