HomeInvestmentThe I.R.S. Backlog of Unprocessed Tax Returns Has Grown to 21 Million

The I.R.S. Backlog of Unprocessed Tax Returns Has Grown to 21 Million

WASHINGTON — The backlog of tax returns at the Internal Revenue Service has grown to more than 20 million in the last year despite efforts by the Biden administration to process filings and send out refunds more quickly, the national taxpayer advocate said in a report published on Wednesday.

The report offers a critical assessment of the Biden administration’s handling of the I.R.S., which has been burdened by staffing and funding shortages in recent years while taking on the responsibility of delivering economic relief money during the pandemic.

The tax agency’s independent watchdog said the I.R.S. was slow to use relief funds that it received as part of the $1.9 trillion stimulus package that Congress passed in March 2021. It said the agency should have moved more quickly to ramp up hiring, reassign employees and make technology changes that could have eased the backlog.

“That the backlog continues to grow is deeply concerning, primarily because millions of taxpayers have been waiting six months or more to receive their refunds,” Erin M. Collins, the national taxpayer advocate, wrote in the report.

A year ago, the I.R.S. had 20 million unprocessed tax returns. That backlog had grown to 21.3 million as of the last week of May.

The I.R.S. disputed the taxpayer advocate’s findings and said more recent data, through June 10, showed unprocessed returns had dipped below 20 million and were down slightly from June 2021.

“The I.R.S. is committed to having healthy inventories by the end of this year and continues to make strong progress handling unprocessed tax returns,” Jodie Reynolds, an I.R.S. representative, said in a statement.

Paper tax returns continue to bog down the I.R.S. as the documents must be manually transcribed into its antiquated computer systems.

Communication is also a major obstacle, Ms. Collins said, with taxpayers seeking to reach customer service agents on the telephone waiting on hold for an average of 29 minutes. Just 10 percent of the 73 million calls that the I.R.S. received were answered by an agent. On both counts, those metrics are worse than last year.

The Biden administration has been calling for more resources for the I.R.S. and asked for $80 billion over a decade to overhaul its technology and bolster its staff. Democrats have pinned blame for the agency’s problems on Republicans, who have long tried to starve it of funding and accused it of political bias against conservatives.

The Treasury Department, which oversees the I.R.S., said on Tuesday that the agency expected to soon finish processing all individual tax returns without errors that were received last year, with business returns filed in 2021 completed “shortly thereafter.” A senior Treasury official noted that the I.R.S. had already been stepping up hiring and had diverted employees to help clear the backlog.

The I.R.S. has struggled to hire staff even when it has the funding to do so. The report noted that the agency had set a goal of hiring 5,473 people in its submission processing facilities this year but had hired only 2,056 so far.

For taxpayers, the dysfunction at the I.R.S. has led to mounting frustration as they await refunds at a time of soaring inflation.

Ms. Collins estimated that nine million taxpayers were experiencing refund delays. More than 300,000 who have been victims of identify theft will have to wait at least a year.

The taxpayer advocate suggested that the I.R.S. work to automate the processing of paper tax returns and make it easier for taxpayers to file electronically. Ensuring that phones are answered should also be a priority.

“If a private company failed to answer nine out of 10 customer calls, customers would go elsewhere,” Ms. Collins said. “That, of course, is not an option for U.S. taxpayers, so it is critical that the I.R.S. increase staffing in its telephone call centers to handle the volume of calls it receives.”

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