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Federal Tax

2023 NTA Annual Report: Big Strides Taken by IRS but Delays Linger

Tim Shaw  

· 5 minute read

Tim Shaw  

· 5 minute read

In her latest annual assessment of the IRS’ efforts to improve taxpayer services and overall administration, National Taxpayer Advocate Erin Collins reported to Congress the agency continues to make progress in known problem areas leftover from the COVID-19 pandemic, but some trouble spots remain.

“The year 2023 was one of extraordinary transition for the IRS and therefore for taxpayers,” Collins wrote in her introductory remarks of the 2023 Annual Report to Congress. “Despair has turned to cautious optimism. Because of the COVID-19 pandemic, the three preceding years had been the most challenging years the agency and most taxpayers had ever experienced.”

At the height of the pandemic, the IRS fell behind with processing paper Forms 1040. At the end of the 2021 filing season, the backlog totaled 17 million returns. By the end of calendar year 2023, that backlog “has been virtually eliminated,” read the report. However, this success did not carry over to amended individual tax returns, business amended tax returns, or correspondence, the backlogs of which “remain at double their pre-pandemic levels.”

Collins said these continued delays in processing amended returns and taxpayer communications — and consequently delays in issuing refunds — are the result of opportunity cost to tackle the other biggest administrative issue at the IRS: customer phone line answer rates and wait times. During fiscal year 2021, roughly only 11% of phone calls were answered. This metric reached 29% in fiscal 2023, but Collins warned that the figure does not “present a complete picture” of what taxpayers or practitioners experience, as the IRS’ measure of its phone success is “highly technical.” Still, she commended the IRS for reducing the average wait time from 29 minutes in fiscal 2022 to 13 minutes in fiscal 2023.

“The IRS cannot easily shuffle employees back and forth between answering phones and processing correspondence, so unproductive employee time was the price it had to pay to improve telephone service levels,” read the report. “Going forward, the IRS needs to find a way to move employees between those two functions more nimbly. For present purposes, however, we need to keep in mind that backlogs in processing tax returns and taxpayer correspondence drive much of the phone volume.”

Another outstanding issue is the long turnaround times for victims of tax-related identity theft to have their cases resolved. In fiscal 2023, self-reported cases took on average 19 months to complete and for taxpayers to receive owed amounts. The fiscal year ended with an inventory of about 484,000, the NTA reported.

Among priority administrative recommendations Collins supplied to the IRS were two points on its workforce. First, she urged the agency to address how open jobs are posted, expedite the pace of the hiring process, and make positions more competitive pay-wise. Second, she said an issue with shuffling staff between customer support work and inventory processing is that new hires tend to lack sufficient training to succeed, especially when speaking directly with taxpayers.

“The IRS has always had challenges with training, and those challenges are greater when the agency is staffing up.”

 

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