…they are doing the best they can… REALLY?
Wow, how time flies. We are already at the end of February. Of course, a big thing on our minds now is getting 2021 tax returns processed.
Many of you may also wonder about the processing of prior years’ tax work. You would think that since the IRS is into a new tax year then all the returns from prior years are processed. I am sorry to report that it is not the case.
Here are a few major groupings with the stats sourced from Politico and the IRS website.
- Form 1040 (Individual tax returns) for 2020: as of 2/8/2022, there were about six million returns not processed. This number is unchanged from 12/31/2021.
- Form 1040X (Amended individual tax returns) for 2020 and older years: as of 2/8/2022, 2.3 million returns not processed. This number is unchanged from 1/8/2022.
- Form 941 (Federal quarterly payroll tax returns) for 2021: as of 2/2/2022, there were 1.5 million tax returns unprocessed. This number is up by 400,000 from 1/26/2022. The 400,000 are unprocessed Quarter 4 – 2021 tax returns. This means that the IRS is not keeping up with its quarterly processing responsibilities.
- Form 941x (amended federal quarterly payroll tax returns), which are generally for 2021 and can be 2020 as well: as of 2/2/2022, there were 444,000 unprocessed returns, which is down by 1,000 from a week earlier. Form 941x is the form that is used to process the ERC, Employee Retention Credit. This is supposed to be a “thank you” from the federal government to employers who were able to retain employees and keep them on the payroll during this Pandemic. The National Restaurant Association reported that eighty-three percent of restaurant employers who have applied for this credit more than six months ago have not received any funds.
- Open and unanswered mail as of 12/15/2021 totaled 5.9 million pieces. This compares to about two million pieces in 2019.
- The telephone demand blew up. In 2021, the IRS received 195 million calls DURING the filing season. That compares to 39 million calls in 2019.
- The IRS has an error resolution system which is where the IRS will send a return if there are errors on it. From 2017 through 2020, the volume has been relatively constant at about 15 million individual returns and about 4 million business returns. In 2021, individual returns almost doubled to over 28 million returns and business returns were up fifty percent to over six million returns.
With this kind of backlog and headache, the IRS determined that it did not need as many processing centers. Its plan was to go from five centers to two centers. When work is not completed when a facility is closed, it must be moved. Maybe this has contributed to the backlog of the IRS.
- In 2019 Cincinnati was closed.
- In 2021 Fresno was closed.
- In 2024 Austin was scheduled to be closed. This decision was reversed in January 2022.
So now the IRS will keep three service centers open.
We hope the situation will get better soon. In reality, my guess is that it will be a haunting problem for both taxpayers and tax professionals through a good portion of 2022.
If you are getting notices and/or need other tax help, please contact me at Bruce@AndersenCPA.com.