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Continued Woes at the IRS

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The IRS is grossly underfunded and understaffed and over the past two years, Congress has made their job even harder by asking them to manage the delivery of stimulus payments and advanced child tax credits to millions of Americans. So, it is no surprise that the IRS is way behind on opening their mail and processing returns. As of 12-23-21, the IRS had:

  • 6.2 million unprocessed 1040s (Individual Tax Returns)
  • 2.8 millions unprocessed 941s (Payroll Tax Returns)
  • 2.4 million unprocessed 1040Xs (Amended Individual Tax Returns)
  • 427 thousand unprocessed 941Xs (Amended Payroll Tax Returns – most likely amended to claim the Employee Retention Credit)
  • 4.75 million unanswered letters from taxpayers (many of these are responses to letters the IRS computers continued to spit out despite the long delays in processing).

What can you do?

  • Be patient.
  • Write to your congressperson and ask them to fully fund the IRS.
  • Be sure you file with accurate and complete information so your refund doesn’t get stuck in the “Needs Review” pile. Especially important for reporting Advanced Child Tax Credit payments and stimulus payments.

What is the preparer community doing?

Today, 11 professional tax organizations wrote a letter to the IRS Commissioner and members of Congress urging them to:

  • Discontinue automated compliance actions until the IRS is prepared to devote the necessary resources for a proper and timely resolution of the matter.
  • Align requests for account holds with the time it takes the IRS to process any penalty abatement requests.
  • Offer a reasonable cause penalty waiver, similar to the procedures of first time abate (FTA) administrative waiver, without affecting the taxpayer’s eligibility for FTA in future tax years.
  • Provide taxpayers with targeted relief from both the underpayment of estimated tax penalty and the late payment penalty for the 2020 and 2021 tax year.

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