It’s never been a particularly pleasant experience dealing with the IRS, but the IRS is struggling mightily right now in a way they have never struggled before. Their service is at an all-time low and there is no end in sight. They have millions of unopened pieces of mail dating back months and months. There are significant delays in processing of basic returns. There are significant issues and delays with IRS notices being sent out with payments being applied properly and with their reading and processing of replies to IRS notices.
Electronically filed simple individual returns with direct deposit in a normal year get processed and refunded within 10 business days, now it’s sometimes taking 3 months and they still aren’t done. We’ve seen it take 6 months to get a power of attorney processed, which normally takes a week. This has led to massive issues and delays with IRS notices, responding to IRS audits, pulling a basic transcript for clients, confirming payments, getting the status of refunds, everything the IRS normally does.
There have been 3 massive tax bills in the last 15 months and there are significant changes the IRS has had to implement while at the same time the impacts of COVID on their workforce, their ability to remote work, the significant issues experienced by taxpayers as a result of COVID, plus all the law changes they are trying to implement and come up with guidance for as Congress is continually coming with new legislation. All of this is a monumental task just like it has been for our firm. I think we’ve done a very good job as a firm in rising to the challenge and tackling all of this, but we’ve definitely experienced some delays in client service as a result. As a firm I think we are nearly caught up or will be by the fall.
The IRS has not risen to the challenge of the past two years and the IRS has made a mess of the situation which is not likely to be remedied for more than a year. Unfortunately, there really is no end is sight to the backlog at the IRS, the problem seems to be getting worse if that’s possible and I see the next 24 months being a huge challenge in dealing with the IRS.
In April they IRS had 29 million refunds to process, a massive number to have outstanding. https://www.accountingtoday.com/news/irs-sees-delays-in-tax-refunds-and-quarterly-payments
This IRS report from June shows they answered only 4% of phone calls on individual returns and there is a 500% increase in identify verification holds on returns and there were twice as many unprocessed returns at the end of tax season this year.
We aren’t sure when any of this will get turned around at the IRS but we want you to be aware of what is happening so when refunds are delayed, the IRS sends out notices requesting payments you’ve already made, or the IRS fails to respond to things, know that it’s a system wide problem at the IRS. We just need to hope for the best in every interaction with them for the next year or two.