IRS erases last season's backlog, but still faces 2022 crush

The Internal Revenue Service says that it will have erased its backlog of last season’s tax returns by the end of this week

IRS Backlog (Copyright 2018 The Associated Press. All rights reserved.)

The Internal Revenue Service said Tuesday that it will have erased its backlog of last season's tax returns by the end of this week.

And with 143 million returns from this year's tax season processed so far, agency officials say there's a greater likelihood of being caught up on processing all returns by the end of this year.

The agency has faced a well-publicized backlog of tens of millions of tax returns and clogged customer service phone systems, which leaders have attributed to decades of underfunding and antiquated internal computer systems.

“To date, more than twice as many returns await processing compared to a typical year at this point in the calendar year, although the IRS has worked through almost a million more returns to date than it had at this time last year," the agency said in statement Tuesday.

Administering pandemic-related programs — including stimulus checks and advanced Child Tax Credit payments — imposed a new workload on the agency over the past two years.

That's on top of an IRS workforce that is the same size it was in 1970, though the U.S. population has grown exponentially and the U.S. tax code has become increasingly complicated.

A Treasury official, briefing reporters on condition of anonymity, said agency employees have worked 500,000 overtime hours to bring down the backlog.

Agency officials have been asking Congress for increased funding for the agency.

During the 2020 budget year, the IRS processed more than 240 million tax returns and issued roughly $736 billion in refunds, including $268 billion in stimulus payments, according to the latest IRS data.

In that same time frame, 59.5 million people called or visited an IRS office.

In a joint letter addressed to Sen. Ron Wyden, D-Ore., who heads the Senate Finance Committee, Treasury Deputy Secretary Wally Adeyemo and IRS Commissioner Chuck Rettig said Tuesday that the agency has provided over $298 billion in refunds to Americans this year, and electronic returns without errors have been processed within 8 to 21 days.

“Despite this progress, there are real challenges ahead,” the letter said. "Because the IRS entered this filing season with a significant backlog, millions of paper returns received in 2022 have not yet been processed."

The agency has been working to catch up to the ever-mounting pile of work. The agency entered this year’s tax filing season with 8 million unprocessed returns from 2021, and by the end of this week will have polished off the last of those that didn’t contain taxpayer errors, it says.

Last week, the agency unveiled voice bots to help eligible taxpayers easily verify their identity to set up or modify a payment plan while avoiding long wait times.

And in March, the agency announced plans to hire 10,000 new workers. Thus far 1,500 new workers have been hired, according to Treasury.