The Internal Revenue Service (IRS) began accepting and processing tax returns on Monday, Jan. 24, 17 days earlier than last year. But despite the early start, experts say this year’s tax season is already off to a rough start.
This year, tax returns are more complex, thanks to the addition of stimulus payments and advance child tax credits. And in addition, IRS agents are dealing with a massive backlog of paperwork to get through.
A recent report shows that the IRS has already received more than 26 million tax returns, which is 28% more than the agency received this time last year. Let’s look at the biggest challenges that could affect when you receive your refund this year.
A large backlog of tax returns
The IRS faces a huge backlog of paperwork, which includes nearly 24 million 2020 tax returns that still need to be processed. The agency has blamed this backlog on its outdated computer system and inadequate funding.
In a Jan. 27 letter, the agency stated, “We are continuing to balance multiple unprecedented demands, including starting the filing season as well as continuing to work on important new tax provisions.”
A hiring shortage
The current worker shortage isn’t just affecting restaurants and retail stores — it’s also impacting government agencies like the IRS. During the first half of 2021, the IRS had just one agent for every 16,000 calls the agency received.
This year, the agency hoped to hire 5,000 new workers to deal with the large backlog of tax returns. So far, the IRS has only been able to fill fewer than 200 of those roles. This hiring challenge is likely due to the low starting salary — entry-level IRS employees typically earn a base salary of $24,749.
The IRS stopped sending out certain notices
Over the past couple of months, the IRS has stopped sending out certain automated notices to taxpayers. Initially, the IRS stopped notifying taxpayers when the agency has credited payments but has no record of a tax return being filed.
In Feb., the IRS suspended two more notices — CP80, which deals with unfiled tax returns, and CP501, which deals with balances due. The IRS said it was discontinuing these letters to minimize confusion for tax professionals and taxpayers.
IRS employees are getting shuffled around
And finally, another challenge the IRS faces is that current employees keep getting shuffled around. According to Politico, 1,200 employees were temporarily reassigned to help clear the backlog of unprocessed tax returns.
Employees who previously processed tax returns have been reassigned to their old jobs for the next eight months. It’s part of what the agency calls its “all hands on deck approach.” The agency expects these employees to return to their current positions in September 2022.
If you’re concerned about a challenging tax season, the best thing you can do is to file your return early. And it’s essential to file electronically rather than mailing in a paper return — according to the IRS, paper returns can take anywhere from six to eight weeks to process.