Why This Tax Filing Season Could Be Ugly
National Taxpayer Advocate Erin M. Collins warns the agency will continue to struggle with tight budgets and backlogs. Her advice: File electronically!
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.
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.
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.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.
-
Stock Market Today: Stocks Shrink From Highs as CPI Looms
The Nasdaq hit a new record early Tuesday but drifted lower into the closing bell.
By David Dittman Published
-
Tax Pros: Is Someone Fraudulently Using Your IRS PTIN?
Tax Filing An unmonitored preparer tax identification number (PTIN) can lead to serious issues.
By Kelley R. Taylor Published
-
Can Tariffs Make Childcare Affordable?
Tariffs President-elect Trump suggested tariffs can address the childcare crisis, but economists are doubtful.
By Gabriella Cruz-Martínez Published
-
IRS Shakeup? What Trump's Commissioner Pick Could Mean for Taxes
IRS An unconventional nominee comes amid broader efforts to reshape the IRS and tax policy in 2025.
By Kelley R. Taylor Published
-
IRS Could Lose Another $20 Billion in Funding
IRS A mistake in legislative language could soon risk the tax agency's Inflation Reduction Act funding.
By Gabriella Cruz-Martínez Published
-
Are You a Renter? You Could Save on Taxes
Tax Breaks With these tax savings at your fingertips, rent may be more affordable
By Kate Schubel Last updated
-
2025 Open Enrollment: Some DACA Recipients Can Purchase Affordable Care Act Health Insurance
Open Enrollment Your eligibility to purchase health insurance from the federal marketplace may have changed. Here's what you need to know.
By Gabriella Cruz-Martínez Published
-
Holiday Shopping Tax Tips for Business Owners
Tax Deductions Before hitting the sales, businesses should know these key deductions and look out for overspending.
By Kate Schubel Last updated
-
NYC Congestion Pricing: Ghost Tax or Necessary Fee?
State Taxes Drivers headed to Manhattan’s downtown district will face a new $9 toll in January.
By Gabriella Cruz-Martínez Published
-
Tax Credit vs. Tax Deduction: What’s the Difference?
Tax Breaks Your guide to tax deductions and credits, how the IRS treats them differently, and how they impact your tax bill.
By Kate Schubel Published