Can you expect faster tax refunds in the future? Recent customer service improvements and technology upgrades at the IRS suggest that a new “normal” — where people receive their federal tax refunds sooner than they did in the past — is a strong possibility. The funding for the agency’s improvements, some of which have helped the IRS clear a pandemic backlog of over 23 million unprocessed tax returns, comes thanks to the Inflation Reduction Act (IRA). The IRA allocates $80 billion in funding for the IRS over ten years and the agency recently released a report detailing how it plans to use the funds.
According to agency officials, some taxpayers already saw the benefits of IRS service improvements this filing season. In an annual report to Congress, The National Taxpayer Advocate's office points to “quicker refunds for millions of taxpayers.”
Additionally, IRS Commissioner Danny Werfel said in a statement, that the IRS has “dramatically improved phone service thanks to more staff," Werfel added, "More walk-in services are available across the country. New digital tools have been added. And these are just the first steps."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
New IRS Agents and Faster Tax Refunds
IRS service improvements are important. As of February 2023, approximately 23.5 million unprocessed tax returns had piled up in part due to the COVID-19 pandemic. That backlog of unprocessed returns caused millions of refund delays. (In some cases, it took years for refunds to hit people's bank accounts). However, the IRS recently announced that it cleared that backlog and did so at a faster-than-average rate. That refund “clean slate” hints at the possibility that going forward, many people will get federal tax refunds faster than they used to.
But the pandemic wasn’t the only reason for the millions of unprocessed tax returns and long phone wait times. In recent years, the IRS hasn’t had enough staff to work through the unprocessed paper returns or answer taxpayer calls in a timely manner.
Since then, the IRS has hired 5,000 new representatives to answer customer calls. According to the Treasury Department's 2023 Filing season report card, the IRS effectively cut hold times this year by 85%. Prior to the new staffing, average call hold times during tax season were 27 minutes. Hold times are now only four minutes, meaning that many taxpayers can respond to IRS notices and resolve processing delays faster.
More IRS.gov Tools
Increased IRS funding has also allowed the IRS to expand the use of digital scanning. The agency hopes that continued advancements in scanning, and other planned technology upgrades, lead to even faster processing times for paper returns and tax refunds.
The IRS also wants to expand its Document Upload Tool, so you can respond to more types of IRS notices online. Contacting the IRS should also become more convenient with a callback feature that the agency says will be added this summer. The feature will allow you to choose a prompt for the agency to call you back instead of waiting on hold.
The IRS's $80 billion spending plan includes hiring 20,000 more employees over the next two years. That additional staffing, including highly trained IRS agents, could mean more representatives available to answer phones, review, and audit tax returns. That could result in even shorter call waiting times, faster tax refund processing, and possibly more audits for large corporations and wealthy taxpayers.
Where’s Your Refund?
And, if you’re wondering about the status of your federal tax refund for this year, you can use the Where’s My Refund portal, which is available on the IRS website. Although the average tax refund is lower this year compared to last, it is still $2,878 (as of April 7).
-
-
Retirement Planning with Life Insurance
An indexed universal life insurance policy can help you with tax mitigation and extra retirement income in addition to death benefits for your beneficiaries.
-
Which Retirement Accounts Should You Withdraw From First?
Here’s a standard order for when you should tap which account when you’re in retirement.
-
Supreme Court: Yes, the IRS Can Secretly Obtain Your Bank Records
The Supreme Court has sided with the IRS in a case that involves owing the IRS money, taxpayer privacy, and notice.
-
Will an IRS Tax Prep Service Replace H&R Block or TurboTax?
A government-run tax preparation and filing service has some wondering if people will leave H&R Block and TurboTax and let the IRS do their taxes instead.
-
Supreme Court to Decide if IRS Can Secretly Obtain Bank Records
Among other high-profile issues, the Supreme Court is considering a case involving taxpayer privacy and the IRS.
-
IRS Says File Soon for $1.5 Billion in Unclaimed Tax Refunds
Unclaimed tax refunds from 2019 are waiting for millions of people who might not know it – but only if they file the pandemic-era tax return soon. Are you one of them?
-
IRS $80 Billion Plan Targets Taxpayer Compliance, Improved Service
The IRS unveiled its much-anticipated strategic operating plan detailing how the agency will spend $80 billion in funding allocated over 10 years under the Inflation Reduction Act.
-
Etsy, eBay, PayPal Want IRS 1099-K Relief for Online Sellers
Companies like ebay, Etsy, and PayPal want Congress to raise the new $600 reporting threshold for IRS Form1099-K to give relief to millions of sellers who use their sites.
-
Tax Scam: IRS Warns Taxpayers Against Filing False W-2 Info
Scams A new tax scam on social media advises lying on your W-2 to falsely claim credits and bigger refunds.
-
Is Your First RMD Due April 1?
An important required minimum distribution (RMD) deadline for some retirees is just around the corner.
