A new year ushers in many changes for the Internal Revenue Service, but one massive problem will not go away – backlogs.
While the IRS still must deal with a backlog of mail and a backed-up phone system that leaves taxpayers and practitioners on hold and frequently drops the call, changes are in the works. Among them are a potential new commissioner (Danny Werfel was nominated for the role in November 2022) and an increased budget that will give the IRS billions of dollars to spend, although it has less than two months left to develop a spending plan.
New IRS Commissioner
On Nov. 22, President Joe Biden nominated Danny Werfel, who served as the acting IRS commissioner in 2013, to replace Charles Rettig, whose term ended in November.
In the interim, the IRS is being led by Acting Commissioner Douglas O'Donnell.
Werfel, who currently works as the Managing Director and Partner on the federal and public sector teams at Boston Consulting Group, formerly served as the deputy controller and then federal controller at the White House's Office of Management and Budget.
If he is confirmed by the Senate, Werfel will have to deal with the daunting task of creating the plans to eliminate the paper backlog and fix the phone system. He will also have to deal with House Republicans, who have expressed concern about the IRS and the infusion of roughly $80 billion into its budget.
Create a spending plan
In an ideal world, Werfel would have already been confirmed and leading the IRS.
However, until he is officially confirmed, those currently leading the IRS have until a Feb. 17 deadline imposed by Treasury Secretary Janet Yellen to “produce a six-month operational plan detailing how these resources ($80 billion) will be deployed over the course of the next decade."
In a letter dated Aug. 17, 2022, Yellen gave the IRS six months to create a plan to improve taxpayer service, modernize technology, and increase the pursuit of tax evasion by the wealthy, along with details on how resources will be spent on technology, service improvement, and personnel. She also stressed the plan must include metrics.
As part of the Inflation Reduction Act, Congress allocated $80 billion for the IRS to spend over the next decade, including $46 billion over the next decade to target enforcement, with almost $3.2 billion budgeted for taxpayer services.
Improving customer service
The media has well-documented the customer service issues faced by the IRS.
According to a report issued in mid-2022 by National Taxpayer Advocate Erin Collins, the IRS received roughly 73 million phone calls during the 2022 filing season, with just 10 percent of calls reaching an IRS employee. By the end of May, she estimated the IRS had a backlog of 21.3 million unprocessed paper tax returns, which represented an increase of 1.3 million unprocessed returns over the same time last year.
A Dec. 16 Government Accountability Office report found the IRS had a backlog of about 10.5 million paper returns and other returns stopped for errors. While the Service eliminated the 2021 backlog, it could not handle the 2022 paper returns, and as a result, as of late September had about 12.4 million returns to process, resulting in refund delays for millions of taxpayers.
In order to reduce its backlog, IRS staff were reassigned from answering phones to processing mail, which then created a nightmare for people trying to call the IRS during the filing season.
According to thetaxadvisor.com, the IRS began a pilot program in October 2022 to thwart line-jumping services to let practitioners who pay a fee to a private company to move ahead in the phone line so they can get their tax questions answered quickly.
However, in an email to the AICPA, one practitioner cautioned the IRS Practitioner Hotline is worse than ever.
"It is impossible to get through at any time of the day,” the email said. “They make you solve a puzzle every time you call, hang up on you if you do happen to get on hold, and make it impossible to solve client issues. This is outrageous."
Hiring more staff
About 4,000 new customer service representatives were hired by late October, and the IRS plans to hire another 1,000 to be trained to field taxpayers' questions on the phone and provide other services during the 2023 tax season.
These new hires, a representative from the IRS told thetaxadvisor.com, will not only be in place for the start of the upcoming tax season, but they will complete training by Presidents Day (Feb. 20).
Need to file electronically
As a result of all the issues being faced by the IRS, the Zinner & Co. Tax Team strongly urges taxpayers to file their returns online. The use of digital returns will ensure your return is not stuck in a backlog and helps to expedite your refund, should you be entitled to one.
The Zinner & Co. Tax Team can help you with your tax returns. Please call us at 216-831-0733 to schedule an appointment.