The National Taxpayer Advocate's 2021 Report to Congress (Part 1)
By Joel N. Crouch on January 24, 2022
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Joel N. Crouch
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On January 12th, the IRS National Taxpayer Advocate delivered her annual report regarding the IRS to Congress. The report contains statistical information and recommendations for how the IRS could improve its service and how Congress could assist the IRS in making the suggested improvements. For those of us who assist clients with IRS matters, we were not surprised that the Advocate’s report stated that 2021 was the most challenging year ever for taxpayers and the IRS. “From the perspective of tens of millions of taxpayers, it was horrendous.” (They should have said that it was the most challenging year for tax professionals also.) However, the report said the IRS deserved credit for working with the hand it was dealt. The report not only points an accusatory finger at the IRS, but it is also critical of the Taxpayer Advocate Service (TAS) as well as Congress for failing to properly fund the IRS and the TAS. The report is over 200 pages and contains a great deal of information, so I thought I would do a few blog posts on the information in the report, with this post focusing on the issues highlighted by the Advocate.
In a section entitled “Processing Backlogs Led to Long Refund Delays”, the report says that “the IRS was behind even before the 2021 filing season had even started because it carried over approximately 11.7 million returns” from the 2020 filing season. The IRS was not finished processing all the 2019 tax returns until June of 2021, which we all know was the middle of the 2020 tax return filing season. The IRS received over 17 million 2020 paper returns that were taking up to eight months to process. As of December 18, 2021, the IRS had 2.3 million amended returns that it had not processed and the time to process those returns had increased to at least 20 weeks. Tax practitioners know that 20 weeks is generous, at best.
The report called the 2021 IRS telephone service the worst ever. Due to delays in refunds, etc. the volume of calls to the IRS skyrocketed in 2021 to 282 million. Only 32 million of those calls reached a live person and as discussed in a prior blog post, even if you reached a live person, there was a good chance they were not be able to answer your questions. The report also said the average hold time was 23 minutes, which seems very short and inaccurate based on mine and my colleagues’ experience.
According to the report, the IRS took months to process taxpayer responses to IRS notices, further delaying refunds and in some cases leading to premature collection notices. We have seen numerous cases of the IRS prematurely assessing tax and penalties and sending notices. The resulting telephone calls and letters to unwind the premature assessment further ties up IRS resources. The IRS heavily promoted its “Where’s My Refund?” program and taxpayers relied on it to determine when to expect their refund. However, the delay in processing tax returns makes the Where’s My Refund? program worthless to millions of taxpayers.
With respect to the TAS, the report says although the TAS was created to serve as a safety net for taxpayers, “over the past few years, the combination of more cases, fewer experienced Case Advocates, and the inability to close cases due to limited IRS resources has caused the TAS safety net to fray. That has increased case cycle times, made it harder for taxpayers to reach TAS, and reduced service levels for taxpayers and congressional offices that refer cases to us.” The number of TAS case receipts in 2021 was 264,000 as compared to 167,000 in 2017, a 58% increase. Some frustrated taxpayers are contacting their congressmen about tax issues and the congressmen’s office will make an inquiry to the TAS on behalf of the constituents. The number of annual congressional inquiries has typically been 10,000-11,000. In 2021 the number of congressional inquiries was 66,000. At the same time, the TAS budget on an inflation-adjusted basis has declined by six percent.
The report recommends that Congress provide more funding to the IRS and TAS to “improve the taxpayer experience and modernize the IRS’s information technology systems”. Although the Build Better Back bill includes $80 billion more for IRS enforcement, this bill seems to be stalled for the time being. In response to the TAS report and in light of the stalled BBB bill, some in Congress are asking for emergency funding for the IRS. We shall see.
For questions regarding this blog post or any other civil or criminal tax related matter, please feel free to contact Joel Crouch at (214) 749-2456 or jcrouch@meadowscollier.com.
In a section entitled “Processing Backlogs Led to Long Refund Delays”, the report says that “the IRS was behind even before the 2021 filing season had even started because it carried over approximately 11.7 million returns” from the 2020 filing season. The IRS was not finished processing all the 2019 tax returns until June of 2021, which we all know was the middle of the 2020 tax return filing season. The IRS received over 17 million 2020 paper returns that were taking up to eight months to process. As of December 18, 2021, the IRS had 2.3 million amended returns that it had not processed and the time to process those returns had increased to at least 20 weeks. Tax practitioners know that 20 weeks is generous, at best.
The report called the 2021 IRS telephone service the worst ever. Due to delays in refunds, etc. the volume of calls to the IRS skyrocketed in 2021 to 282 million. Only 32 million of those calls reached a live person and as discussed in a prior blog post, even if you reached a live person, there was a good chance they were not be able to answer your questions. The report also said the average hold time was 23 minutes, which seems very short and inaccurate based on mine and my colleagues’ experience.
According to the report, the IRS took months to process taxpayer responses to IRS notices, further delaying refunds and in some cases leading to premature collection notices. We have seen numerous cases of the IRS prematurely assessing tax and penalties and sending notices. The resulting telephone calls and letters to unwind the premature assessment further ties up IRS resources. The IRS heavily promoted its “Where’s My Refund?” program and taxpayers relied on it to determine when to expect their refund. However, the delay in processing tax returns makes the Where’s My Refund? program worthless to millions of taxpayers.
With respect to the TAS, the report says although the TAS was created to serve as a safety net for taxpayers, “over the past few years, the combination of more cases, fewer experienced Case Advocates, and the inability to close cases due to limited IRS resources has caused the TAS safety net to fray. That has increased case cycle times, made it harder for taxpayers to reach TAS, and reduced service levels for taxpayers and congressional offices that refer cases to us.” The number of TAS case receipts in 2021 was 264,000 as compared to 167,000 in 2017, a 58% increase. Some frustrated taxpayers are contacting their congressmen about tax issues and the congressmen’s office will make an inquiry to the TAS on behalf of the constituents. The number of annual congressional inquiries has typically been 10,000-11,000. In 2021 the number of congressional inquiries was 66,000. At the same time, the TAS budget on an inflation-adjusted basis has declined by six percent.
The report recommends that Congress provide more funding to the IRS and TAS to “improve the taxpayer experience and modernize the IRS’s information technology systems”. Although the Build Better Back bill includes $80 billion more for IRS enforcement, this bill seems to be stalled for the time being. In response to the TAS report and in light of the stalled BBB bill, some in Congress are asking for emergency funding for the IRS. We shall see.
For questions regarding this blog post or any other civil or criminal tax related matter, please feel free to contact Joel Crouch at (214) 749-2456 or jcrouch@meadowscollier.com.
