The IRS backlog for processing Forms 941 (Employer’s Quarterly Federal Tax Return) is increasing, according to the Service’s webpage on mission-critical functions.
Mission-critical.
The IRS’s webpage on mission critical functions notes that while the Service is open and processing mail, tax returns, payments, refunds and correspondence, the effects of the coronavirus (COVID-19) health emergency continue to cause delays in some of its services.
Form 941 backlog.
One of the items the IRS specifically addresses on its mission-critical webpage is the status of processing Form 941. The IRS says that it is opening mail within normal timeframes. However, as of August 17, 2022 the IRS has a 4.8 million backlog of unprocessed Forms 941. The IRS explains that tax returns are opened in the order they are received and that if an employer filed a return electronically and received an acknowledgement, no further action is required other than promptly responding to any requests for information.
The IRS says that it is working to get through the carryover inventory and stresses to taxpayers not to file a second tax return or contact the IRS about the status of a filed return.
Backlog increasing.
As of July 27, 2022, the IRS reported a 3.4 million backlog of unprocessed Forms 941. Back in May of 2022, the IRS reported that it had a 3.7 million backlog of unprocessed Forms 941. The August 17, 2022 report of a 4.8 million backlog of unprocessed Forms 941 should indicate to employers that there will likely be longer delays in processing with the backlog increasing by more than 1.5 million in a matter of weeks.
Corrected/adjusted returns delayed too.
The IRS also informed the public that, as of August 17, 2022, its total inventory of unprocessed Forms 941-X (Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund) was approximately 135,000. The Service noted that some of these corrected returns cannot be processed until the related Forms 941 are processed.
Back in May 2022, the backlog of unprocessed Forms 941-X was at 264,000. As of July 27, 2022, that backlog was 177,000. So, the Form 941-X backlog continues to decrease, which may be a bit of positive news for those who filed a corrected employment tax return that the IRS is getting closer to bringing the backlog to zero.
The IRS explains that while not all these returns involve a COVID-19 credit, the inventory is being worked at two sites (Cincinnati and Ogden) that have trained staff to work possible COVID credits.
Inflation Reduction Act adds resources to IRS.
On August 16, 2022, President Biden signed the Inflation Reduction Act (P.L. 117-169) into law. The legislation contains nearly $80 billion in new funding for the IRS. That funding is to be utilized for enforcement, business system modernization, taxpayer services, and operations support among other items. This additional funding may be vital to mission-critical functions for the IRS, including the processing of Forms 941.
On the Inflation Reduction Act, IRS Commissioner Chuck Rettig said, “During the next 10 years, these funds will help us in many areas, including adding critical resources to not just close the tax gap but meaningfully improve taxpayer service and technology.” He noted that the changes will not be immediate and that it will take time for the provisions to be implemented.
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