During last year’s tax-filing season, fewer than 10% of taxpayers who called the IRS were able to get a representative on the phone. Millions of taxpayers still haven’t received their 2020 refunds. Kiplinger’s spoke with Erin Collins, the IRS National Taxpayer Advocate, about what taxpayers can expect during this year’s filing season.
What were the primary reasons for IRS backlogs in 2021, and will the situation improve this year? The last filing season was extremely difficult for many taxpayers, practitioners and the IRS. At the end of 2020, more than 11 million tax returns had not been processed, and that carried over to 2021 season. We’re going to have a similar situation this year. We’ve also had COVID-19 restrictions for employees, and the IRS has had continued reductions in budgets.
Since the beginning of the pandemic, Congress has approved three economic stimulus payments and monthly advance child tax credit payments. How has that affected the IRS’s ability to provide customer service? The IRS only has a finite amount of resources. Getting those checks out the door takes staff away from what they need to do every day. I’m concerned that during this filing season, we had the third stimulus check and the advance child tax credit, and there’s some confusion over those payments. Some people had a life event where maybe they had a new child or their income changed, which could increase or decrease their payments. The IRS is going to have to reconcile some of those tax returns, and that will require manual processing.
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What can taxpayers do to reduce the likelihood that their refunds will be delayed this year? File electronically. That’s the easiest thing you can do that will be a time saver. If you’re getting a refund, direct deposit really speeds the time to process the payment. If you received a stimulus payment and/or an advance child tax credit payment, you should try to make sure your information matches what the IRS has. The IRS has been sending out letters to taxpayers who received the advance child tax credit that show how much they received last year and the number of dependents it used to determine that amount. It’s doing the same for the third economic stimulus payment. (With the child tax credit, you can also go to www.irs.gov/credits-deductions/child-tax-credit-update-portal to look up the amount of your payments.) Taxpayers can use these letters to make sure the number they put on their return is consistent with IRS records.
What’s your advice for someone who decides they need professional help with their taxes this year? If you qualify, the IRS’s Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly are good resources. They get a lot of training from the IRS and are free for lower-income taxpayers. Go to www.irs.gov to find a location near you. If you’re able to pay to hire someone, you want to check their credentials. Use a licensed preparer, whether it’s a certified public accountant or enrolled agent, who has had the proper training to prepare tax returns. Some of the unlicensed preparers may have good intentions, but they may not be as familiar with the laws and changes in the laws.
While the problems in 2021 were extreme, taxpayers have complained about the IRS for years. What needs to be done to make long-term improvements in how the agency deals with taxpayers? The simple answer is funding. The IRS budget has been depleted for the past decade, which has reduced its ability to hire. The IRS brings in about 95% of the country’s budget. You hear a lot of jokes about the IRS but it performs a very critical function, and Congress has called on them to assist in administering social programs. It’s a vital organization for the country that needs to be fed, and the problem is, it’s been starved.
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