Wilmington, US 79 F

IRS Cleared Backlog of 2021-Filed Returns

The IRS this week will complete processing of all original, error-free individual income tax returns filed on Form 1040 in 2021, clearing a backlog of 8 million returns, the agency said June 21 in an update on its historic backlog.

As of June 10, the IRS had processed over 4.5 million of the more than 4.7 million individual paper returns that were filed last year, according to an agency news release and a Treasury Department official.

“This milestone represents substantial progress” by the IRS, the Treasury official told reporters in a call. “At this point, from a return processing perspective, they’re in a better shape than they were at any point during the pandemic.”

Shortly following this week’s expected clearance of individual returns from last year, business returns filed on paper in 2021 will be processed, the IRS release said. It added that agency employees continue to work on the few remaining 2021 individual returns that have processing issues or require more information from the taxpayer.

In addition, the IRS said it had successfully processed the bulk of returns filed this year: over 143 million, which generated nearly 98 million refunds worth more than $298 billion. As of June 10, there were 11 million unprocessed individual returns, including those received before this year, along with new returns received for the 2021 tax year. Of those, 1.9 million returns required error correction or other special handling, and 9.1 million were paper returns that are awaiting review and processing.

Millions of paper returns remain to be processed because the IRS started 2022 with a larger-than-usual backlog tied to the COVID-19 pandemic and staff shortages, the Treasury official said. At the start of a normal filing season, the agency has no inventory of unprocessed paper returns left over from the previous year and at most 1 million pieces of paper correspondence with taxpayers, the official said.

In its release, the IRS said it has automated the correction of common mistakes, reducing the hours spent doing so by agency examiners. In its “error resolution” process, an IRS examiner during the 2021 filing season could manually correct an average of 70 returns with errors per hour, but new technology implemented this season has made it possible to correct 180 to 240 returns per hour. As of June 12, 2021, there were 8.9 million returns in error resolution; as of June 10 this year, only 360,000 returns were awaiting correction.

However, because agency employees were busy clearing the prior-year backlog, the IRS now has more than twice as many returns to process as it normally would at this point in the calendar year, according to the official.

Amid ongoing criticism from members of Congress and frustration among taxpayers over delays in processing 2021-filed returns, the IRS has formed “surge teams” of employees to speed processing this tax season while using newly granted direct-hiring authority to bolster staff.

The IRS is on track to meet a goal of hiring 5,000 new staff members this year, the Treasury official told reporters.

According to a June 21 letter  from Treasury to congressional leaders, the IRS over the past four months conducted nine recruiting events where it issued about 3,000 job offers. It has already onboarded over 1,500 new employees and is in the process of hiring thousands of contractors to assist with its backlog-clearing work.

“Employees are working around the clock” to catch up on the backlog, having logged about 500,000 hours of overtime so far this year, IRS Commissioner Chuck Rettig and Deputy Treasury Secretary Wally Adeyemo said in the letter. It was sent to the top Democrats and Republicans on the Senate Finance Committee and the House of Representatives’ Ways and Means Committee.

Rettig and Adeyemo urged Congress to provide “sustained, multiyear funding to invest in overhauling antiquated technology,” some of it dating back to the 1960s and ’70s, improve taxpayer service, and increase voluntary compliance, while equipping the agency to avoid future crises.

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