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Federal Tax

NTA: 2023 Filing Season a Massive Improvement Over Last Year

Tim Shaw  

· 5 minute read

Tim Shaw  

· 5 minute read

In her statutorily mandated midyear report to Congress, National Taxpayer Advocate Erin Collins shared that the IRS is doing a much better job with return processing turnaround times and answering taxpayer phone calls compared to the previous filing season.

“I’m finally able to deliver some good news: The taxpayer experience vastly improved during the 2023 filing season,” Collins wrote in her introductory remarks to begin her 2024 Midyear Report to Congress. “The IRS caught up in processing paper-filed original Forms 1040 for individuals and various business returns; refunds were generally issued quickly; and taxpayers calling the IRS were much more likely to get through—and with substantially shorter wait times. Overall, the difference between the 2022 filing season and the 2023 filing season was like night and day.”

At the time when the National Taxpayer Advocate released its midyear report last year, the IRS was still struggling to clear out its inventory of unprocessed paper returns accumulated over the course of the pandemic where the agency had insufficient resources and staff to keep up with its ordinary operations on top of the additional challenges presented with administering relief programs. By the end of the 2022 filing season, there were 13.3 million unprocessed paper tax returns. This year, however, the filing season closed with $2.6 million, “a return to pre-pandemic levels,” according to Collins.

She added that while paper returns take up a small percentage of total tax returns (less than 10% during the pandemic), the manual nature of the work needed to process those returns compared with e-filed returns is slow, and that the “IRS has been slow to deploy scanning technology to machine-read paper-filed returns.” IRS Commissioner Danny Werfel previously told reporters on Tax Day that while this filing season was the first time the agency has been on “normal footing” since before the pandemic, efforts will be focused on digitization to expedite both return processing and communications with taxpayers.

Collins dinged the IRS on the marginal reduction in the backlog of amended returns—3.6 million last year down only to 3.4 million—but explained that this was a matter of opportunity cost. “Customer service representatives (CSRs) in the IRS’s Accounts Management (AM) function perform two roles—they answer telephone calls, and they process taxpayer correspondence and cases, including amended returns,” said Collins. “Due to several factors, including internal information technology (IT) system limitations, CSRs can’t do both at the same time, so it’s a zero-sum game. Every day an employee spends answering the telephones is a day the employee isn’t processing amended returns or taxpayer correspondence, and vice versa.”

Although the IRS did achieve its goal of reaching at least an 85% “Level of Service” (LOS) in answering the phones this year, CSRs can only answer phones and not perform other tasks. The report notes that CSRs were idle 34% of the time. “Therefore, while the LOS achievement was commendable—and it benefited millions of taxpayers—it could only be accomplished by prioritizing the phones over other IRS operations, and it resulted in greater delays in the processing of paper correspondence.”

Because of this tradeoff, Collins explained, the IRS took on average seven months to process amended individual income tax returns. For businesses, the biggest bugaboo was employee retention credit (ERC) claims. The ERC allows employers to claim up to $26,000 per qualifying employee, making it a highly sought incentive during the pandemic. But so-called ERC promoters or “mills” that purposefully exaggerate ERC claims or make fraudulent claims to lure in clients have led the IRS to put ERC scams on its Dirty Dozen list. Consequently, processing Forms 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, with ERC claims have been “relatively slow,” Collins said.

But since an emphasis was placed on customer service, call wait times were slashed (from 29 minutes to 8) and the number of calls answered this filing season soared (10% to 35%). The report cautions, though, that the 85% LOS calculation leaves out as much as 73% of total calls.

“Specifically, the IRS computation only includes calls directed to its AM telephone lines (so it excludes 7.2 million calls directed to compliance and other telephone lines); it excludes 8.5 million calls in which taxpayers hung up before being placed into a calling queue; and it excludes about 6.9 million calls that were routed to receive automated responses.”

With this in mind, representatives answered 7.7 million out of 9.3 million calls actually routed to them. The LOS rating would be far worse if it accounted for the IRS answering 11 million out of a possible grand total of 32 million. Also, wait times were sluggish for Automated Collection System lines, the Installment Agreement/Balance Due line, and the Return Integrity Compliance Services lines, the report found.

“Despite these areas of relative weakness, the big picture shows taxpayers had a much easier time reaching the IRS this filing season, reducing the need for repeat calls and lengthy wait times—a welcome relief for millions of taxpayers,” said Collins.


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