On January 12, 2022, the National Taxpayer’s Advocate Office released a report on the conditions at the IRS. The report’s findings indicate that there is a massive backlog of unprocessed forms, and a larger volume of calls than customer service representatives are able to address.
What’s In the Report
While the full report contains a more thorough analysis, we’ve selected a few quotes to summarize the conditions at the IRS:
- “As of December 18, 2021, the IRS reported it had a backlog of 2.3 million unprocessed Forms 1040-X, Amended U.S. Individual Income Tax Return, and that processing times “can be more than 20 weeks instead of up to 16. Delays in processing Forms 941, Employer’s Quarterly Federal Tax Return, and Forms 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, have been significant. As of December 15, the IRS reported it had 2.8 million unprocessed Forms 941 and about 427,000 Forms 941-X that cannot be processed until the related Forms 941 are processed.”
- “In FY 2021, the IRS received about 282 million telephone calls. Customer service representatives (CSRs) only answered about 32 million, or 11 percent, of those calls.”
- “Where the IRS issued compliance notices, the IRS’s automated systems ordinarily move cases to the next step in the compliance process if a taxpayer’s response is not recorded within a specified number of days. For example, failure to respond to a math error notice within 60 days means the tax is assessed and the taxpayer loses the right to contest it in the U.S. Tax Court. Failure to pay an assessed liability means the case is moved to the collection function. To prevent enforcement actions from taking place before the IRS processed taxpayer responses, the IRS generally reprogrammed its systems to allow additional time. But there were gaps. For example, we are aware of cases where taxpayers received notices of intent to levy while their responses requesting abatement of a math error assessment or disputing a proposed examination adjustment were still awaiting processing, or their amended returns had not been processed. For example, the IRS finished the 2021 filing season with a backlog of 35.3 million returns that required manual processing.”
What Does This Mean for Small Businesses?
The unopened mail and unprocessed returns mentioned in the report are hitting home with small businesses. In addition to delayed Employee Retention Credit refunds, we are now seeing the first round of notices from the Social Security administration because they cannot reconcile the COVID sick pay wages. After you read the excerpts from the report above, you may better understand why you can’t get anything resolved with the IRS at this time but that certainly does not relieve the frustration.
Doerhoff and Associates are Here to Help
Tax season is here again, and it’s important that you file correctly to avoid issues with the IRS. Do you have questions about your small business taxes? Contact us today. We are here to help small business owners navigate the tax season with confidence.
