Annual Report to Congress

Written by February 7, 2022

Erin Collins, the National Taxpayer Advocate for the IRS, recently released her 2021 Annual Report to Congress. This report details the top ten problems that taxpayers faced in calendar year 2021, which Collins describes as “the most challenging year taxpayers and tax professionals have ever experienced.” These ten problems to be aware of are as follows:

  1. Processing and refund delays: Due to processing and refund delays, over 35 million returns and refunds from 2021 have not been processed by the IRS. These returns will carry over into the calendar year 2022, which may potentially worsen this issue by causing even more delays.*Tip: To lower the likelihood of facing processing and refund delays, taxpayers are encouraged to file their returns electronically.
  2. IRS employment issues: One key issue is that the IRS lacks highly trained employees, which requires time and resources. More external support from federal agencies (i.e. Congress and Department of the Treasury), as well as internal support (i.e improvement in hiring/recruiting processes), is crucial in order to alleviate this issue.
  3. Telephone issues: The IRS phone service has suffered due to the COVID-19 pandemic; there’s been a high influx of taxpayers’ calls, but the number of Customer Service Representatives at the IRS has not changed to match this demand. Thus, the IRS’ Level of Service, which quantifies the level of telephone/customer service, is at an all-time low.
  4. Lack of transparency and clarity: The IRS lacks consistent transparency and struggles to provide clear and timely information to taxpayers. That being said, the IRS can take steps to improve by updating taxpayers more frequently and addressing FAQ’s.
  5. Antiquated systems and processes: The IRS’ antiquated practices, such as manually processing returns, has resulted in the aforementioned processing and refund delays.
  6. Under-developed IRS online accounts: The IRS implemented various online services in response to the COVID-19 pandemic. Unfortunately, these services lack integration and have limited capabilities; a possible solution for the future is the development of a one-stop system for the IRS’ online accounts.
  7. Difficulty with digital communication: The IRS’ digital communication tools are currently relatively limited, due to “budget and human resource limitations.”
  8. E-filing barriers: Currently, there are barriers to e-filing tax forms, schedules, and documents. This is harmful because e-filing is beneficial for taxpayers, since it reduces the likelihood of processing delays and transcription errors (in comparison to filing paper tax returns).
  9. Correspondence audits: “Correspondence audits produce the lowest agreement rate, the highest no-response rate, and the highest volume of cases assessed by default.” This adversely affects low-income taxpayers (income <$50,000), who make up a majority of taxpayers subject to correspondence audits.
  10. Collection: This is another issue that targets and harms low-income taxpayers. The IRS issues automated collection notices, which do not adequately explain taxpayers’ rights. Consequently, many taxpayers aren’t aware of collection alternatives (i.e. collection due process hearing or installment agreements), which are currently underutilized.

 

Note: This information cannot take the place of advice from a lawyer. Each case is different and needs individual legal advice. You should contact the LITC or a private attorney if you need representation on a tax matter or if you have questions.

Source: https://www.taxpayeradvocate.irs.gov/reports/2021-annual-report-to-congress/most-serious-problems/

-Emily Chang