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IRS will finally finish processing last year’s tax return backlog this week


By Katie Lobosco, CNN

The Internal Revenue Service will finally get through the massive pandemic-induced backlog of federal tax returns filed in 2021 this week, the agency said on Tuesday.

But more than twice as many returns filed in 2022 still await processing compared with a typical year at this point.

The IRS began the calendar year with about 8 million unprocessed individual returns left over from 2021. At the time, a report from the National Taxpayer Advocate called the situation a “crisis.”

The individual returns that were filed last year without errors are all expected to be processed by the end of this week. Business paper returns filed in 2021 will follow shortly after.

To work through the backlog, IRS employees have logged 500,000 hours of overtime so far this year. The IRS shifted 2,000 employees from other parts of the agency to help process returns and also hired more than 1,500 new workers.

“Completing the individual returns filed last year with no errors is a major milestone, but there is still work to do,” said IRS Commissioner Chuck Rettig in a statement.

There are millions of remaining tax returns to process that were filed this year. While the agency is behind compared with years prior to the pandemic, it is ahead of last year by about 1 million returns.

The IRS has been able to keep pace with electronically filed returns — processing them on average within eight to 21 days — but it takes longer to process the returns filed on paper. However, the agency has automated the correction of common mistakes made on paper tax returns, speeding up that process. Last filing season, an IRS tax examiner required roughly one hour to clear 70 returns. Now, that number has more than doubled to about 200.

The IRS is on pace to end 2022 without a backlog of original returns.

Pandemic challenges

The Covid-19 pandemic created new challenges for the agency and brought on additional work, resulting in backlogs of returns in both 2021 and 2022.

Many of its employees were working from home at the start of the pandemic, meaning some paper returns sat in trailers for months waiting to be opened and the agency’s technology did not allow all customer service calls to be answered remotely.

The pandemic also made it harder for taxpayers to access in-person help at IRS Taxpayer Assistance Centers, many of which were shut down for months in 2020.

Meanwhile, Congress tasked the IRS with sending out billions of dollars in economic relief benefits like the stimulus payments and monthly enhanced child tax credit payments.

The pandemic-related challenges exacerbated existing problems at the IRS created by longtime underfunding. The agency’s baseline budget has shrunk by about 20% on an inflation-adjusted basis since fiscal year 2010, and its workforce has shrunk by about 17%.

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