The 2022 Annual Report to Congress Released: Here’s What it Had to Say About the Taxpayer Experience
The 2022 Annual Report to Congress was released on January 11.
It points out that taxpayers “experienced more misery in 2022” due to poor service from the IRS. It also stated that the IRS made progress in reducing the volume of unpaid tax returns and correspondence and that it will be starting the 2023 filing season stronger than before.
Read on to find out the pain points the report revealed and the improvements the IRS has in store.
Return Processing and Refund Delays
Delays in return and refund processing were key taxpayers pain points. Some taxpayers experienced delays of 6 months or more when getting their returns.
The IRS will be in a better position to process delays in a timely manner in 2023. They went from a backlog of 4.7 million at the beginning of 2022 to a backlog of 1 million by the end of the year making significant progress. However, the organization is still facing major issues as cases of fraud are leading to suspended returns.
Delays in Processing Taxpayer Correspondence
The IRS had to send out millions of notices to taxpayers in 2022 alerting them of issues regarding math errors, underreporting, identity authentication and more. Each notice required a written response.
It took the organization about 193 days to process the written responses as opposed to the 89 days it took in 2019. The longer processing times are carried over from the pandemic. Although agencies are aware this in an issue, no solution has been determined.
Difficulty Reaching the IRS by Telephone
Taxpayers who wish to call the IRS often have trouble getting through. According to statistics, only one of eight calls go through to an IRS employee and average hold times are 29 minutes.
The IRS has set up a Practical Priority Service to handle their calls, but it has not yielded much of an improvement. With the new service, 1 in 6 calls get through and hold times are closer to 25 minutes. Clearly more updates need to be made.
So how is 2023 shaping up? Here is an idea of what to expect:
- The IRS has worked through a backlog of unprocessed returns so people should be seeing returns sooner
- Congress has provided the IRS with additional funding so it can hire more customer service staff
- The IRS has already hired 4000 new customer service reps and plans to hire 700 more employees. It has also improved efficiency so the employee onboarding process is cut in half meaning help will come sooner
However, taxpayers may not see improvements right away. It will take time to get new employees trained. In the meantime, existing employees may have to double up on duties reducing the time they spend focusing on their regular tasks.
Taxpayer Advocate Service Recommendations to the IRS
In the past few years, the Congress has increased funding to the IRS and other taxpayer services to reduce taxpayer pain points. The Secretary of Treasury issued a 2022 memorandum with recommendations on how the funding should be spent. These are as follows.
- Hire and train more human resources employees to speed up the hiring an onboarding process of other IRS employees
- Ensure all IRS employees are well-trained to do their jobs, particularly those that are customer-facing
- Create robust and accessible online accounts that allow taxpayers and practitioners to access, download and upload materials easily and conveniently.
- Temporarily expend the uses of Documentation Upload tool or similar technology- this will allow taxpayers to upload documentation to a website, so they won’t have to rely on snail mail
- Improve readability of tax transcripts- this will make transcripts easier to understand cutting back on time consuming confusion
- Enable all taxpayers to e-file their returns: E-filing is the fastest way to file and get a return, but some taxpayers are not permitted to e-file. For example, if the return requires additional documentation, they may have to paper-file. The Secretary of Treasury is recommending that the IRS now allow all taxpayers to e-file.
National Taxpayer Advocate ‘Purple Book”: Legislative Recommendations to Strengthen Taxpayer Rights and Improve Tax Administration
- Amend the ‘Lookback Period’ to allow tax refunds for certain taxpayers who took advantage of postponed filing deadlines due to COVID-19: To be eligible for a tax refund, tax payments must be made within a lookback period of three years plus the period of any extension of time to file. The IRS postponed the tax return filing period in both 2020 and 2021. However, a postponement is not an extension and does not come with a lookback period. Many taxpayers did not understand this and paid their taxes late. Taxpayer Advocates are now recommending Congress extend lookback periods to align with the postponements.
- Authorize the IRS to establish minimum standards for paid tax return preparers. This would put a competency test in place for tax preparers to ensure they are well-trained therefore cutting back on errors.
- Expand the U.S. Tax Court’s jurisdiction to adjudicate refund cases and assessable penalties. Currently, taxpayers who litigate a dispute with the IRS must go to U.S. Tax Court while taxpayers who paid their tax liability and are seeking a refund must sue the U.S. district court or U.S. Court of Federal Claims. The TAS is recommending that the U.S. Tax Court be used for both matters as it is a more accessible and efficient option.
- Modify the requirement that written receipts acknowledging charitable contributions must pre-date the filing of a tax return. Modern legislation states that a taxpayer must have a written acknowledgement of a donee charitable organization before claiming a deduction. The TAS agrees that an acknowledgement is necessary but is recommending that legislation changes so that acknowledgement can be received after the deduction is claimed.
- Restructure the Earned Income Tax Credit to make it simpler for taxpayers to reduce improper payments. The TAS is advocating for the EITC to be divided into two credits, one based on the workers income unrelated to qualifying children and one for a refundable tax credit. This process would increase accuracy and eliminate time-consuming mistakes.
- Expand the protection of taxpayer rights by strengthening the Low-Income Taxpayer Clinic (LITC) Program. This would provide more funding to the LITC program so low-income taxpayers can get the assistance they need.
For more information, please visit the 2022 National Taxpayer Advocate Annual Report to Congress page.