IRS ‘In Crisis’: Why Coloradans Should File 2021 Returns Early

·3 min read

COLORADO — The Internal Revenue Service is “in crisis” heading into the tax season, according to a new watchdog report that says obsolete technology and understaffing have caused a backlog of millions of Americans’ tax refunds and stimulus checks.

The takeaway from the National Taxpayer Advocate report, released Wednesday: Taxpayers in Colorado should file their 2021 returns as far ahead of the Monday, April 18, tax deadline as possible. And they should file electronically.

The first day taxpayers can file their returns is Monday, Jan. 24. That’s two weeks earlier than in 2021 as the agency struggles to keep pace amid a resurgence in COVID-19 infections. IRS Commissioner Chuck Rettig warned on Monday of a particularly messy tax season.

The agency’s problems were amplified in the report from the watchdog group, which reports twice annually to Congress on taxpayer issues. Its annual report summarizes the top most serious problems taxpayers encounter and makes recommendations on how to fix them.

There are a slew of them, Taxpayer Advocate Erin M. Collins, who heads the independent watchdog agency within the IRS, wrote in the report.

Both the last and current tax seasons “conjure up every possible cliché for taxpayers, tax professionals, the IRS, and its employees — it was a perfect storm,” she wrote.

“There is no way to sugarcoat the year 2021 in tax administration: From the perspective of tens of millions of taxpayers, it was horrendous,” she wrote, adding that 2022 could be “as bad, and potentially worse.”

A 20 percent inflation-adjusted budget cut has led to chronic understaffing, a problem made worse by extra responsibilities associated with the coronavirus pandemic, according to the report. The IRS dispensed billions of dollars in stimulus payments, monthly enhanced child tax credit payments and other economic relief payments.

How bad is it?

  • By mid-December, the IRS still had yet to process 8.6 million individual returns and more than 3 million business returns left over from tax year 2019.

  • Nearly 5 million pieces of mail hadn’t been answered.

  • The IRS received about 282 million telephone calls in 2021, more than double the number received in 2020, but customer service representatives only answered 11 percent of them.

  • Taxpayers used the IRS “Where’s My Refund” tool about 130 million more times than in the previous year to check the status of their refund. The report said the tool isn’t helpful in many situations because it doesn’t answer taxpayers’ specific questions, such as why a refund was approved but the payment wasn’t sent, the reason for the delay or where the refund is in the process.

The IRS processed 478 million stimulus payments totaling $812 billion and enhanced child tax credits totaling more than $93 billion to more than 36 million while at the same time processing electronic returns in a timely manner. Traditional paper returns were the culprit in the delays, the report said.

One way taxpayers can avoid delays in getting their 2021 refunds is to avoid paper returns and file them electronically so refund payments can be made by direct deposit, Rettig said Monday.

This article originally appeared on the Denver Patch

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