The Treasury Department and the IRS announced an aggressive plan to end the pandemic inventory backlog this year. Deputy Secretary of the Treasury Wally Adeyemo and IRS Commissioner Charles P. Rettig traveled to the IRS Campus in Philadelphia where they outlined an aggressive plan to end the backlog. This year, millions of taxpayers are awaiting the processing of their tax returns and receipt of their refunds. The backlog has created one of the most challenging tax filing seasons in U.S. history. The IRS’s backlog challenges today stem from two key sources. First, the agency has been chronically underfunded for more than a decade, with its budget cut by nearly 20% since 2010. The IRS workforce is the same size it was in 1970. However, the U.S. population has grown by 60 percent and the complexity of the economy has increased exponentially. Second, the pandemic created a unique set of new operational challenges for the IRS. The agency was called upon to support emergency relief for taxpayers. This included distributing an unprecedented three rounds of Economic Impact Payments, totaling over $830 billion, to 85 percent of American households. Including individual refunds, the IRS has distributed over $1.5 trillion to Americans since the pandemic began. To tackle the backlog, the IRS has laid out the following approach.
Hiring and Surging Thousands of Employees
- Hiring 10,000 new employees: The IRS has announced plans to hold job fairs across the country in March in Kansas City, Austin and Ogden to fill 5,000 open positions in the coming months. Working with Treasury, the Office of Personnel Management and the National Treasury Employees Union, the IRS recently secured direct hiring authority for these employees and an additional 5,000 new hires to be made over the next year.
- Creating a new 700-person surge team to process new returns: The IRS is in the process of shifting approximately 700 employees at the Austin, Ogden, and Kansas City campuses to process original returns. At full capacity, this surge will close millions of cases each month.
- Maintaining initial surge team to process amended returns and taxpayer correspondence: Earlier, the IRS moved hundreds of existing employees with previous experience to address the backlog and currently has approximately 800 people on this team, which started in February .
- Paying overtime to IRS employees: The IRS has required mandatory overtime for the over 6,000 employees processing original returns. Overtime is also available for approximately 10,000 employees processing amended returns and taxpayer correspondence.
- Supporting additional contractor support for inventory: The IRS is quickly pursuing additional contracting options to help with original return processing, including mailroom operations, transcription, and input of paper returns into IRS systems.
Increased Taxpayer Assistance to Reduce Processing Delays
By helping taxpayers file accurately, the IRS can ensure that refunds are issued quickly. An error-free tax return is processed within 21 days. Accurate individual filings also proactively reduce inventory by decreasing the share of returns that require time-intensive manual attention by employees. Efforts to help taxpayers file accurately include:
- Sending taxpayers more information than ever to prevent processing delays: The IRS has sent more than 100 million letters to taxpayers to prevent delays in processing. In the letters, the IRS proactively calculates the amounts received by taxpayers in third Economic Impact Payments and the advance Child Tax Credit to ensure more accurate returns.
- Providing online help: The IRS created and expanded self-service portals for taxpayers, including for online payment agreements, requesting payment transcripts, requesting Identity Protection PINs and updating personal information.
- Providing in-person help: The IRS has increased the availability of in-person support for taxpayers through extra hours at Taxpayer Assistance Centers throughout the filing season. It also awarded $41 million of support to over 330 organizations across the U.S.
- Providing help on the phones: The IRS has expanded customer callbacks to 70% of its toll-free lines. This fiscal year, a callback option has been offered to over three million taxpayers, saving those preparing their taxes almost one million hours of wait time. Additionally, the IRS has deployed 2,000 contractors to respond to taxpayer questions about Economic Impact Payments and the advance Child Tax Credit.
Developing and Deploying Updated Technology to Automate Functions
- New automated tool to correct return errors: For this filing season, the IRS developed an automated tool that dramatically expands efficiencies and has helped the IRS close 1.5 million error resolution cases in a single week.
- Suspension of dozens of common notices to prevent inventory increases: the IRS reconfigured its systems to temporarily halt sending approximately 40 form notices to taxpayers. This includes mailing automated collection notices that are normally issued when a taxpayer owes additional tax and the IRS has no record of a taxpayer filing a return. This action provides important relief for taxpayers who otherwise could have received a notice for taxes already paid but not processed due to the backlog. This also results in less inventory since taxpayers won’t contact the IRS to inquire about the notices received.
- Improving automated tools for taxpayer assistance: The IRS developed new automated support technology to help taxpayers, including online live assistance and new voice and chat bots to quickly answer taxpayer queries. This has allowed the IRS to move many phone service representatives to work inventory given the exigencies of this filing season.
The IRS and Treasury have worked closely with legislators to highlight the need for resources and this year’s House-passed omnibus represents the largest funding increase for the IRS in the last two decades. However, Treasury stated that the IRS needs stable, long-term funding to be able to modernize outdated technological infrastructure and transition much of its manual work into automated processes.
